The new tax law goes into effect on January 1. People have a lot of questions. In Illinois, there are lines out the door at tax assessors offices to prepay property taxes. Personally, I was glad to see this subsidy go away, and wish they would have gone a lot further with other subsidies.
Esther Fung of the Wall Street Journal writes, “The tax plan features a deduction for pass-through businesses—income derived from commercial activities that their owners or shareholders pay on their personal income taxes. That deduction includes the income that flows to REIT investors through dividends—mainly from rent or mortgage interest—but not the capital gains secured when properties are sold.
The plan allows investors to deduct 20% of the income, with the remainder of the income taxed at the filer’s marginal rate. It is available even if the taxpayer doesn’t itemize deductions. Shareholders of REITs who now pay the top income-tax rate of 39.6% on dividends received would see that rate drop to 29.6%”
A 10% drop.
If you are an investor and want to take advantage of this, sign up for CFX. If you want to buy, you can request access here. They are a West Loop Ventures portfolio company where I sit on the board. They are a place where you can trade non-listed but public REITs.
All of these REITs have a net asset value audited by a Big Four accounting firm. I know people that trade them using a mostly buy and hold strategy. You have to do some research, but the Trump Tax plan just made the returns that much better.