$36,000 in Lost Deductions Thanks to the Trump Tax Plan

This post is in: Blog, Real Estate

I recently met with a prospective new client to review primarily how he should buy a new large commercial real estate prospect.

His main question was what entity to use.

As part of the process, I first wanted to understand where the client was now. And since the last available tax return was 2017, it was easy to spot where he would be now that it was 2018 and the Trump Tax Plan was fully in place.

One big change was on his personal return. He lived in a state that had a high income tax rate and a high real estate property tax rate. Now the deduction for the combination of state income tax and real estate property tax is limited to just $10,000.

That meant that he would lose $36,000 of itemized deductions.

Now what? There was no simple way to bring them back, but we did some things to get him some of the deductions and pick up new ones.

  • He began taking the home office deduction so that he was able to deduct a portion of the property tax through his business and not just his on Schedule A (which was limited)
  • He added a C Corporation to his businesses entities.
  • He put a MERP in place. This picked up almost $60,000 of medical expenses that now became deductible.
  • He employed his 17 year old daughter in his business. This was an additional deductible expense his business and the income paid to his daughter was under the tax bracket threshold so she paid no tax.

What plans have you put in place to replace your lost your deductions? How can we help? Give Richard a call at 888-592-4769 to see if we may be a good fit.


  1. Rene Lamar says:

    I’ve deleted the instructions as far as c Corp and llc and which to use where

    I have rental properties, which have no mortgages on them

    I flip houses also

    C Corp for the flips and llc for rental ?

    Thank you

  2. Diane Kennedy says:

    Without knowing anything more about your income or other income, your plan in and out of a C Corporation, my default would be to use an S Corp for the flips and an LLC for the rental.

    This is something you’d want to have an experienced CPA help you with because everybody’s circumstances are different.

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