In a last-minute addition to the new tax bill, a provision was added to help real estate owners. The bill will allow entities with little or no payroll to receive a pass-through deduction. Under the general proposal if the pass-through entity has no payroll then they will not be allowed a deduction. The rationale is that Congress did not want owners stopping their payroll to maximize their 20% deduction. To help industries that are capital intensive, Congress added an alternate calculation of the pass-through deduction. Under the alternate calculation, a taxpayer will be allowed a deduction equal to the sum of 25% of their wages plus 2.5% of the adjusted basis, immediately after acquisition, of the qualified property. Qualified property is generally defined as tangible property subject to depreciation.
This alternative calculation should benefit many real estate professionals and non-service industries.