 Income tax 2021-2022, residential rental property, what's new? Get ready to get refunds to the max, diving into income tax 2021-2022. Most of this information can be found in publication 527 residential rental property 2021 on the IRS website irs.gov irs.gov. Income tax formula, we're looking at line one income. We would typically have a supplemental schedule that being an income statement with income and expenses. Expenses basically being deductions to net then what rolls in to line one income. We then have the schedule E. This is basically kind of the income statement form. It's the supplemental income and loss. We're focused on it from the rental real estate in our case. So what's new? We have the excess business loss limitation. If you report a loss on line 26, 32, 37 or 39 of your schedule E form 1040, you may be subject to a business loss limitation. The disallowed loss results from the limitation will not be reflected on line 26, 32, 37 or 39 of your schedule E. So we always have to keep these kind of losses in mind because note that the IRS is skeptical of losses because you might be able to then take the loss against other income reducing basically other income. And obviously from the IRS perspective, they want to be our partner when there's income but not be taking on the responsibility or risk when there's a loss. So they're going to be skeptical of the losses. So instead use form 461 to determine the amount of your excess business loss, which will be included as income on schedule one form 1040 line 8. So the loss then is going to be kind of like in the ink, it would flow in. If you get the loss would flow in to eventually the form 1040 schedule one and then to the 1040. And it would be in like the income area, but it would be like a reduction of the income area. So any disallowed loss resulting from this limitation will be treated as a net operating loss that must be carried forward and deducted in a subsequent year. So that's going to be the typical kind of thing when we have losses. Then the question is, well, if I don't get the loss today, do I get to use it against some other income at some other timeframe in this case in the future? Can I carry the loss into the future and take it somewhere else? Now, obviously, whenever you have any kind of carry forwards or backwards or this kind of things that makes a lot of more complexity to a tax return. So when you're dealing with tax returns that have these carry forward types of things, it's nice to be able to have the same software that you're working in and or if it's a new client, then you might want to put, of course, the whole tax return into the prior year software. For example, if you're working on 2021, you might have a copy of 2020. You might want to put the whole 2020 tax return into 2020 software and then roll it forward so that the software can help you with these kind of carry forwards. So you can see form 461 and its instructions for details on the excess business loss limitation. What's new? We have the section 179 deduction dollar limits. So that's the 179 deduction for tax years beginning in 2021. The maximum section 179 expense deduction is $1,050,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during tax year exceeds $2,620,000. Accelerated depreciation for qualified Indian reservation property. The accelerated recovery period for qualified Indian reservation property will not apply to property placed in service after December 31st, 2021. And then we've got the credits for self-employed persons. Refundable credits are available to certain self-employed persons impacted by the coronavirus. See the instructions for form 7202. Credits for sick leave and family leave for certain self-employed individuals for more information. What's new? Continued. We got the paycheck protection program, the PPP Safe Harbor. This was kind of a loan program that went out, of course, to deal with the issues with regards to the pandemic. And basically was basically set up so you have a loan in certain cases that you would qualify for the loan. But under certain under certain conditions or if conditions were met, then they basically relieve the loan, which means it's basically free money at that point in time. If you are able to meet those conditions, which of course caused a lot of tax questions with regards to the loan, whether it be a loan or whether it be income and when you forgive the debt on the loan, is it income at that point in time? And if we make expenditures in order to spend money to give the forgiveness of debt, do we get to deduct those expenditures that we made when we really made the expenditures with the money, which is now free money because the loan was forgiven and so on and so forth for this whole thing. So revenue procedure 2021-20 has allowed for a safe harbor for certain taxpayers who did not deduct certain otherwise deductible expenses paid or incurred during the tax year or years ending after March 26, 2020 and on or before December 31, 2020 that resulted in or were expected to result in forgiveness of the loan. So to find more information, including requirements of this safe harbor, you can see this website here on the IRS website, irs.gov. The COVID-19 related credit for qualified sick and family leave wages. The Families First Coronavirus Response Act, the FFCRA was amended by recent legislation, the FFCRA requirement that employers provide paid sick and family leave for reasons related to COVID-19. The employer mandate expired on December 31, 2020. However, the COVID-related Tax Relief Act of 2020 extends the periods for which employers provided leave that otherwise meets the requirements of the FFCRA may continue to claim tax credits for qualified sick and family leave wages paid for leave taken before April 1, 2021. The American Rescue Plan Act of 2021, otherwise known as the ARP, the ARP adds new section 3131 and 3132 to the internal revenue code to provide credits for qualified sick and family leave wages similar to the credits that were previously enacted under the FFCRA and amended and extended by the COVID-related Tax Relief Act of 2020. The credits under section 3131 and 3132 are available for qualified leave wages paid for leave taken after March 31, 2021 and before October 1, 2021. Rebinders, the Net Investment Income Tax, the NIIIT, you may be subject to the NIIIT, the NIIIT, the Net Investment Income Tax. The NIIIT is a 3.8% tax on the lesser of net investment income or the excess of modified adjusted gross income, basically an income threshold AGI with the adjustment to it, adjusted gross income over the amount. The net investment income may include rental income and other income from passive activities. Use form 8960 to figure this for more information on NIIIT. Go to the IRS website. We have the self-employed tax payments deferred from 2020. So this is another kind of issue that we had that came up recently. So if you elected to defer self-employed tax payments from 2020, see how self-employed individuals and household employers repay deferred social security tax for more information about due dates and payment options.