Senate Republicans inserted an easy-to-overlook provision on page 203 of the 880-page bill that will permit investors to use losses generated by real estate to minimize their taxes on profits from things like investments in the stock market. The estimated cost of the change over 10 years is $170 billion, according to NYTimes.
- Dig Deeper: Under the existing tax code, when real estate investors generate losses from gradually writing down the value of their properties (AKA depreciation), they can use some of those losses to offset other taxes. But the use of those losses was limited by the 2017 tax-cut package. The losses could be used only to shelter the first $500,000 of a married couple’s nonbusiness income.
- Why it matters: The new stimulus bill lifts that restriction for three years – this year, and two retroactive years – a boon for couples with more than $500,000 in annual capital gains or income from sources other than their business.