The Tax Man Is Trying To Cometh Again.

Congress is considering new tax proposals that would place additional burdens on owners and investors in residential and commercial real estate.

What's At Stake?

Congress proposes that ANYONE who receives rental income will be required to file IRS Form 1099reports if they make payments to any contractor (such as plumbers, HVAC repairmen, lawn services and the like) if they pay the contractor $600 or more in any particular year.  Small landlords no doubt receive other Forms 1099, but may have little experience in actually filing them with the contractors and the IRS. 

Congress is considering taxing "carried interest" at ordinary income rates instead of capital gains. Currently, carried interests are taxed as capital gains (at 15%). Carried interest is the share of profits paid out as compensation to a general partner in a limited partnership or limited liability corporation. Forty-six (46) percent of partnership tax returns in 2005 were tied to real estate, according to the Institute of Real Estate Management (IREM). A carried interest is often provided to partner(s) providing the day-to-day management and operation of the partnership and its asset(s). The carried interest usually takes the form of a payment of a specific part of the profits generated when a property is sold, over and above the regular compensation.    (Info from the Realtor Party Action Center.)

Many of collegagues as well as myself, have rental properties that supplement our incomes and will be impacted by these laws.  It's important to share this information to help keep us all aware. If you are opposed to these new proposed tax burdens, write your Congress person and share your thoughts!