Senior Housing Industry – New Tax Reform

At the end of 2017, President Trump and Congress delivered new tax reforms. Within two months, a number of changes came to the Affordable Care Act, immigration restrictions, infrastructure upgrades and regulatory reforms. Many of these changes benefited the senior housing industry and were favorably implemented at the beginning of 2018.

The Senior Housing Political Action Committee, funded by ASHA and donations from larger operators in the senior housing industry, pushed and fought for operators and seniors alike. Working alongside ASHA and congressional contacts fostered over the years, the committee achieved three significant changes protecting the benefits of seniors and operators alike, keeping the senior housing industry strong and productive. Most importantly, they fought to keep value and money where it’s needed most.

The Senior Housing Industry Retains Medical Expense Deductions

Seniors originally faced a 2.5 percent tax increase, changing their current 7.5 percent to 10 percent of adjusted gross income. Under this tax raise, households would need to meet a higher income threshold to benefit from available deductions. This would be additionally problematic for those on long-term care insurance.

While a 2.5 percent increase may seem nominal relative to income, most seniors would be left pinching pennies.

Instead, the senior housing political action committee succeeded in keeping the current 7.5 percent tax break, protecting seniors from a burdensome increase. In doing so, seniors are better able to spend their money on necessary treatments and services within their healthcare communities.

The Senior Housing Industry Qualifies Under the Passive Activity Loss Rule

The senior housing industry had another win with the exemption clarification of the passive activity loss rule under the Limitation of Business Interest Deductibility section.

The bill offered a 100 percent deduction for any real estate properties for business interests. However, complications arose when the technicality of the passive activity loss rule came into question.

Under closer inspection of the rule, those in the senior housing industry were concerned that the services provided in their facilities fell outside of the passive activity definition. If this were the case, businesses and facilities within the senior housing industry would no longer qualify for a 100 percent deduction, instead they would be limited to a mere 30 percent deduction.

It remained unclear whether or not properties within the senior housing industry met the requirements for exemption under the passive loss rule.

By definition, passive activities are “any real property, development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage, or trade of business.”

The senior housing political action committee and ASHA successfully set out to clarify that CCRCs, independent and assisted living communities were part of that definition and therefore eligible for full deduction.

The Senior Housing Industry Receives a New Tax Deduction for Pass-Through Entities

Finally, ASHA and the senior housing political action committee also won a new tax deduction for owners of pass-through entities. Pass-through entities include partnerships and partners, shareholders in S corporations, members of LLCs and sole proprietors.

This new tax deduction offers up to 20 percent for owners of pass-through entities with qualified business income, which is subject to certain limits and restrictions. Qualified business income is defined as the net income from a business without counting amounts in the nature of compensation.

While these three changes in the tax reform may seem small to some, they do benefit those working in the senior housing industry, and ultimately, senior citizens themselves.

ASHA and the senior housing political action committee continue to fight for positive changes to ensure that the senior housing industry receives what it deserves and needs.

Make Your Place in the Senior Housing Industry with the JCH Group

While the climate within the senior housing industry may change, there remains great value and opportunity. The JCH Group leads all brokerages in the senior housing industry. Our investments specialists are absolute experts at assembling and closing the best senior housing investments.

No matter if you are a veteran investor or a green operator, the JCH Group has the information you need to succeed. From free business valuations to exceptional insight, we are your top resource in the senior housing industry.

To learn more about the tax reforms within the senior housing industry, contact the JCH Group today!

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