How Real Estate Investors Can Handle The IRS After COVID

CARES Act Relief

First, I’m sure you’re well aware that with the complications set forth by the COVID pandemic, you’re going to want a CPA to give you professional tax advice this year, perhaps an attorney as well.

President Trump signed a stimulus relief extension at the end of 2020, extending the COVID-19 pandemic and economic relief packages. Approximately $2.3 trillion in relief and government funding is available to qualifying candidates.

Real estate investors have access to rental assistance, unemployment benefits and more — all of which can have significant impact now that it’s filing season.

To account for the extra research and planning, the IRS automatically extended the 2020 filing deadline of individual taxes to May 17, 2021.

Property Tax Relief

Hotels around the world took a catastrophic hit in 2020 due to the COVID pandemic. In the US, this resulted in a new study by the American Hotel & Lodging Association (AHLA) which showed nine out of ten hotels have faced forced lay-offs and that more than half of hotel owners responding were in danger of foreclosure from commercial real estate lenders.

Other commercial property owners were impacted as well, and the next few years will likely show a strong leaning towards a rise in property taxes across the board — this may be due to unexpected funding needs such as debt interest payments, police & EMS, e-learning programs for schools, and other local government. Most of these could be avoided through a solid COVID property tax planning strategy.

The good news is that you may qualify for COVID Property Tax Relief. Be sure to speak with your legal advisor for more information.

Evictions

The eviction ban was extended through March 31, 2021 but was not renewed by President Biden, while the foreclosure ban WAS extended until June 30.

With the new eviction bill applying to approximately 28% – 46% of occupied rental properties, be sure to check with your legal advisor as well as state government agencies, as there may be state-specific guidelines as well.

Rents

The extended bill also accounts for $25 billion as rental relief. These funds are to be used for future rent, utilities and any back-rent owed. If your renters (or yourself) had a household income of 80% or less, below the median area income, with at least one tenant qualified for unemployment benefits (or lost their job), they may have access to additional stimulus payments of up to $1,200 per adult, as well as $500 per child.

Deductions

Typically, you’re allowed a 50% deduction for business meals but with the new bill, you can deduct 100% for business meal expenses incurred in 2021 and 2022. In other words, eating out for the next two years might give you some extra deductions — and it could help support local restaurants who were hit hard during the pandemic.

Conclusion

With these new programs, real estate investors should get some relief from non-paying tenants, receive additional tax deductions, and push tax payments out into the future. Make sure you educate your tenants so that they are also aware of relief options — so they can pay those rents!

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