The CARES ACT signed into law by the last administration provided a few nuggets for real estate investors that are becoming increasingly germane to the current economic climate. This article will bring to light several of those benefits that you need to know about. In no particular order, here is the list:
1. Loan Forbearance
Borrowers who have federally backed multifamily mortgage loans may be eligible to forebear payments for a 30-day extension. Should 30 days not be enough, the CARES ACT allows for three 30-day extensions as long as those payments were made on time as of February 1, 2020. Now a year later, and with the moratorium on evictions still problematic, this benefit for landlords is more important than ever.
2. Alternative Minimum Tax Credits (AMT)
Corporations with any unclaimed AMT credits can claim them immediately. With many corporations filing extensions, it is not too late to claim tax credits (a rare item in the tax world). The TJCA originally required the corporations to space out their AMT credits, but the CARES ACT allows those to be taken immediately.
3. Business Interest Expense Increased
Section 163 (j) of the Internal Revenue Code allows businesses to take business interest as a deduction. It is generally limited to 30% of adjustable taxable income. The CARES ACT increases that limitation to 50% for 2019 and 2020. Call your CPA to determine if you need to restate your 2019 return. Moreover, if you have not filed your return yet, talk to your accountant about taking this on your corporate return for 2020.
4. Loss Limitations Removed
Non-corporate taxpayers were limited on the losses they could claim. The CARES ACT removes those limitations for 2018 through 2020. This means that you can restate your previously filed returns to take those losses to obtain this benefit. CALL YOUR ACCOUNTANT. Who does not want to get more money back from the IRS?
5. Qualified Improvement Property (QIP)
QIP is more commonly called a “leasehold improvement” and the CARES ACT allows those to be immediately depreciated. This is particularly beneficial for commercial real estate. Moreover, this provision is retroactive to 2018.
6. Net Operating Losses (NOLs)
The limitation on NOLs was limited to 80% of taxable income for 2020. This has now been increased to 100%. The 80% limitation will resume in 2021. Additionally, NOLs accrued during 2018, 2019 and 2020, can now be carried back for five years preceding the NOL.
These highlights are not an exhaustive list. Call your accountant to see what can be done for you and your business. Best of luck!