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20% deduction on pass-through income in 2018

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  • 20% deduction on pass-through income in 2018

    I understand that the new tax law has 20% deduction on pass-through income.

    I had invested some money in real estate and have since sold the property and made a small margin out of it. This income would be counted towards 2018. Does this 'extra' non-clinical income from my RE endeavors qualify for this 20% deduction? Since it was only one property, I have not formed a LLC on this one. Is LLC mandatory to receive 20% deduction on this types of RE income? (I know LLC advantages from litigation perspective but this question is purely for tax purposes).

    Thanks in advance.

  • #2
    For tax purposes, you do not need an LLC. As long as you report income on schedule E, it is potentially eligible for the deduction, subject to the income-based limitations discussed in excruciating depth elsewhere. It is important to note that figuring the deduction is on a "per entity" basis, which means that even if you make >$415k taxable income from doctoring, you can still potentially take the deduction on your rental income, it just would be subject to the "25% W2 wages +2.5% unadjusted basis" limitation. Hope that helps.

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