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NAA/NMHC Request Taxpayers Get Full Value of Pass-Through Deduction

utilizing the pass-through deduction

NAA/NMHC joined other real estate partners on a letter to the Treasury Department on June 5 regarding the new pass-through deduction, which was enacted as part of last year’s tax reform legislation. The letter requests that taxpayers be allowed to use the acquisition cost of a property following a like-kind exchange for purposes of fully utilizing the pass-through deduction.

Available through 2025, the new pass-through deduction enables a portion of pass-through business income to qualify for a 20 percent deduction, or a top effective rate of 29.6 percent. For taxpayers earning over $157,500 (single filers) and $315,000 (married couples), the deduction is limited to the greater of:

  • 50 percent of the taxpayer’s share of aggregate W-2 wages paid by the business; or
  • 25 percent of the taxpayer’s share of aggregate W-2 wages paid by the business plus 2.5 percent of the unadjusted basis of all qualified property.

The Act’s deduction for pass-through income should be a significant benefit to the multifamily industry, particularly because it allows owners to qualify based on 2.5% percent of unadjusted basis of qualified property.