Three Big Changes to Real Estate Law This Year | USTaxAid

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Three Big Changes to Real Estate Law This Year

Written by Diane Kennedy, CPA on February 20, 2013


There are three big changes to real estate tax law this year. And, that of course means new strategies. That’s the theme for our webinar Mon, February 25, 2012.

#1: IRS Issues new regulations on repair deductions

If you do work to a property you own, there are two choices: you either get an immediate repair deduction or you have to capitalize it and then depreciate it over time. The IRS has a new way of calculating which you’re supposed to do and whether you get to expense or whatever you have to capitalize. Don’t assume you know the answer to this. It’s probably different than in the past.

#2: Affordable Care Act (Obamacare) kicks in with new surtaxes for passive income

This one you might have heard about already. There are two new Medicare surtaxes starting in 2013. One hits your paycheck and one hits passive income. The one you’ll need to watch out for will be the extra 3.8% surtax. This is applicable to capital gains income or income when you sell investment property.

#3: IRS Audits & Tax Court cases change Real Estate Professional deduction proof.

If you hold property and rent it out, you’re likely to run into this one. One of the best things with real estate is that you can make money, actually put cash in your pocket, and still show a tax loss. In some areas of the country, it’s harder to find properties that cash flow, so unfortunately some people have gotten themselves in the hole of taking money out of their pockets, not putting it in their pocket each month. And then they find out they can’t take a tax deduction for all the money they’re spending. So instead of putting money in their pocket and taking a tax loss to reduce taxes, they are taking money OUT of their pockets and not getting any deduction at all.

There is a way around this, but the IRS has gotten really tough on it. There are some Tax Court cases that are important to pay attention to here.

And there are even more changes especially as they relate to tax rates, itemized deductions and exemptions at the personal level. And if you have a property that you’ve lost in foreclosure, deed-in-lieu of or short sale, you’ve probably got some new tax rules as well. Well, you get the sense that we could turn this into many series of webinars and hundreds of pages of strategies. In fact, we’ve done that. But we can’t squeeze it into just one hour on our Monday webinar.

We will take questions live, though. So if you have a real estate question, we’ll get you an answer. You MUST be on the webinar to participate in the question and answer period. Sign up at

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