By Meredith Caruso May 6, 2019 – Calls to Florida Realtors Legal Hotline indicate confusion – sometimes flat-out outrage – over buyers’ ability to cancel within the
“The new deduction for qualified business income included in last year’s tax reform act should be simplified and made easily available to the 10 million Americans who report income from rental real estate.”
That was the main message delivered this week by Iona Harrison, a REALTOR® from Upper Marlboro, Maryland, as she testified before a public hearing held by the Internal Revenue Service (IRS).
Ms. Harrison was referring to requirements outlined in proposed rules released in August requiring owners of rental real estate to determine whether their rental activity rises to the level of a “trade or business” under Section 162 of the Internal Revenue Code in order to claim the deduction.
“When I read this requirement, I am confused. And I can tell you that the vast majority of my fellow property owners are also going to think this is way less than clear. Even many seasoned tax professionals do not understand the distinction between a ‘trade or business’ and real estate that is held as a productive investment,” she asserted.
To solve the problem, NAR recommended to the IRS that all real estate rentals be considered as meeting the “trade or business” requirements for purposes of claiming the deduction.
The stakes are high for the estimated 40 percent of NAR members who own rental real estate, as the deduction can reach as high as 20 percent of the net rental income earned from the property.
The Treasury Department and IRS are aiming to release the final rules before the end of the year in order to give guidance to owners in time for filing 2018 tax returns.