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Key 2024 Changes for Real Estate Professionals: FinCEN, NIIT, and Rental Property Tax Insights

By
Industry Observer with TriState Tax Resolution LLC

Key 2024 Changes for Real Estate Professionals: FinCEN, NIIT, and Rental Property Tax Insights

By Allan J Rolnick

Attention, real estate professionals! As we step into 2024, it's crucial to be aware of the new regulations and tax changes that could impact your business. The Corporate Transparency Act (CTA) and the Net Investment Income Tax (NIIT) are set to bring significant shifts. Here’s a rundown of what you need to know.

FinCEN's New Reporting Requirements

Starting January 1, 2024, the CTA mandates new filing requirements for corporations, LLCs, and limited partnerships, including many real estate businesses. Non-exempt entities must file a Beneficial Owner Information (BOI) report with FinCEN by December 31, 2024. This report requires details about the beneficial owners of your business, which includes most individuals with significant ownership or control.

FinCEN's new Beneficial Ownership Secure System (BOSS) will use this data to combat financial crimes. While this information isn’t public, keeping it updated is crucial to avoid penalties.

Exemptions to Note

Larger businesses with over 20 employees and $5 million in revenue, as well as certain regulated sectors like banks and non-profits, are exempt from the CTA. Single-member LLCs are included, but sole proprietors and general partnerships typically are not.

Tackling the Net Investment Income Tax

Real estate investors should pay close attention to the NIIT. This 3.8% tax may apply if your modified adjusted gross income exceeds certain thresholds. It’s applicable to various investment incomes, including net rental income. To manage this, consider strategies like investing in tax-exempt bonds, donating appreciated assets, or utilizing real estate-focused tax deferrals.

Maximizing Deductions for Rental Property Start-Ups

For those diving into rental properties, understanding start-up expenses is vital. Costs incurred before you start renting out a property, such as advertising, office expenses, and maintenance, can be deductible. However, the purchase price of the property itself isn't a start-up expense but should be depreciated once the rental business begins.

Remember, the IRS views your rental business as limited to its geographic area. So, expanding into a new location could count as starting a new rental venture for tax purposes.

Conclusion

As a real estate professional, staying ahead of these changes is key to maintaining a compliant and profitable business. Make sure to consult with a tax advisor to tailor these strategies to your specific situation. Let’s navigate these changes together and make 2024 a successful year!


 

Comments (2)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Allan Rolnick one thing we can always count on is more regulations and forms from the government.

Dec 13, 2023 03:52 PM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Enjoyed your blog page, and I added you as a follower. I would love the follow back. Also, then we both get 50 points. Bill

Dec 14, 2023 09:27 AM