Real Estate Agents & Brokers: Are you an SSB?

Sandy Botkin
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If you have been reading my posts, you know that If you are either self employed, an S-corp or a partnership or LLC, you can effectively avoid tax on up to 20% of your net business income (not counting capital gains or investment earnings) as a result of the pass through deduction.

The problem, however, occurs if your business is deemed a “Specified Service Business” (SSB). If you come within the SSB rules and earn over $415,000 (married/filing joint returns) of net taxable income or over $207,500 (single) of net taxable income, you don’t get this benefit.

Originally, I and many other tax professionals noted that Realtors® and Real Estate Brokers are SSB because the new law defined specified service businesses to a number of different enterprises including brokerage and to any business where the reputation is the principal asset of the business.

Recently, however, IRS has come out with new proposed regulations that specifically note that Realtors®/Real Estate Brokers are not considered brokers for purposes of this rule. What that means to you is that as a real estate professional is: you can earn as much as you want and still have your net business income (not counting capital gains or investment earnings) qualify for the 20% pass through deduction. You are NOT considered to be in a specified service business. Interestingly, the IRS even noted that real estate management services aren’t considered a specified service business too.

You should check with your tax professional about this; however, this is very good news for you, and should make your life less taxing.

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