The CARES Act has affected many things in many ways. We want to take a few moments and focus on a few of the ways it has had an impact on the real estate industry. Just a few highlights and key points we wanted to make, as always please see your tax professional or financial advisor for details and strategies tailored to your situation.
- Qualified Improvement Property depreciable life going from 39 to 15 and therefore qualifying for 100% bonus depreciation.
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- Retroactive change – Applicable to property placed in service after 12/31/2017.
- May be worth going back and amending 2018 and 2019 returns.
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- Net Operating Loss Rule Change
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- NOLs incurred in 2018-2020 may be carried back 5 years
- carry forward 80% limit is lifted through 2020. NOLs can be used to offset 100% of taxable income through 2020.
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- Business Interest Expense Limitation
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- Business interest expense limitation for tax years 2019 and 2020 may be increased to 50% of adjusted taxable income vs 30% under TCJA, by making an election. (Partnerships may not do this for 2019 tax year. Special rules apply to partnerships.)
- Businesses, making the election in 2019 can also use 2019 adjusted taxable income to compute 2020 limitation if doing so results in a greater interest deduction
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Other Impacts of Covid-19:
- California Tenant and Landlord Protection Legislation:
- The law is designed to protect tenants from evictions due to COVID-19-related back rent through February 1, 2021.
- Tenants cannot be evicted before February 1, 2021 as a result of past due rents between March 4, 2020 and August 31, 2020, if the tenant is able to provide a declaration of hardship which is in accordance with the legislation’s timeline rules.
- For Hardships that occurred from September 1, 2020 to January 31, 2021, tenants must pay at least 25% of the rent due, in order to avoid eviction.
- The legislation does not forgive any of the unpaid rent amounts. Tenants are still responsible for 100% of the unpaid rents, however those unpaid rents cannot be the basis for eviction.
- This legislation also aims to extend anti-foreclosure protections in the Homeowner Bill of Rights to small landlords, who request CARES-complaint forbearance.
- The law is designed to protect tenants from evictions due to COVID-19-related back rent through February 1, 2021.
Written By:
Shara Rostamlou
P.S. Need to walk through a few of these changes with regards to your current situation? If you are unclear how closely these modifications might affect you and your financial decision making, give us a call and let’s see if we can help. Are you new to RSJ and want to make your very first free consultation with one of our partners? Click here and we can help you as well!