RENT Magazine Q4 '24

Knowing that major changes are planned for 2025, what should you do about tax planning for the rest of 2024? The election is over, so we know the direction taxes will go. We just don’t know what exactly will change. Will we get 100% bonus depreciation again? Will it be retroactive? Will there be increased tax credits? What will happen to the solar tax benefits? WHAT IS HAPPENING NOW.

Bonus depreciation for 2024 is at 60%. That means that cost segregations are still critical for any real estate placed in service during 2024. And remember that you get the 60% bonus even if the property isn’t placed in service until December 31. The key is to make sure it’s “placed in service.” This doesn’t mean it has to be rented. It just must be available and held out for rental.

When it comes to tax planning, the devil really is in the details. You may find out you have more or less taxable income than you expected. If you have little or no taxable income, you may even want to postpone deductions to 2025. This way you won’t waste your tax brackets, standard deduction or itemized deductions. (Itemized deductions other than charitable contributions do not carry over). Many of you are breathing a sigh of relief over the estate tax exclusion, expecting it to stay the same under the Trump Administration. While it will likely stay where it is for the next four years, it’s still a good idea to get your estate planning done. What most people don’t realize is how much good income tax planning can be done as part of your estate plan. WHAT MOST PEOPLE DON’T REALIZE IS HOW MUCH GOOD INCOME TAX PLANNING CAN BE DONE AS PART OF YOUR ESTATE PLAN.

COST SEGREGATIONS ARE STILL CRITICAL FOR ANY REAL ESTATE PLACED IN SERVICE DURING 2024.

If you are like many property investors, you may have had a tough year. If you are in a low tax bracket, you may be tempted to hold off doing the cost segregation until 2025. Just remember that net operating losses carry over. And if you are subject to the business loss disallowance rules, the excess business loss becomes a net operating loss in the succeeding year. Most important is that you sit down with your CPA and run your numbers.

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