The big win for real estate in last year’s tax reform law is the new 20 percent business income deduction. You take it on your net pass-through income. Pass-through income is what most real estate professionals earn. If you’re an independent contractor or if you’ve structured yourself as a sole proprietor, your income is considered pass-through because you calculate your taxes on the individual, rather than the business, side of your tax filing.

Being able to take 20 percent off your income is potentially a big money saver for you and 2018 is the first year you can apply it. That means for the last three quarters, you have had the opportunity to calculate your deduction as part of your estimated payments.

As with any new tax provision, there are questions about applying that deduction in your estimated taxes, and the IRS hasn’t issued final rules yet. But there are a few things you can do.

First, you want to make sure your accountant is aware of the deduction. Second, you can take the safe-harbor approach and calculate your estimated quarterly payments based on what your income was last year. If you do that, even if you’ve underestimated your taxes come April of 2019, when you have to settle up your payments, you won’t get penalized or have interest payments imposed on you. Third, you can choose to calculate your actual payment rather than use last year as a guide. The risk here, though, if you end up underpaying, is you could face a penalty and interest payments. (Although you might be eligible for a penalty waiver depending on your tax-filing history.)

Whatever you do, make sure you have a professional accountant or tax attorney guide you. The IRS is expected to release its final rules before the end of the year. When it does, it will likely release new or modified forms to help you calculate the new deduction.

There are other potentially favorable provisions in the new tax law, starting with the reduction in tax rates. All of the brackets are lower now, so at a minimum, you face lower tax rates on your income. On the negative side, the deduction for business entertainment costs is gone and there’s ambiguity in deducting business meal costs when those costs are wrapped up in your entertainment expenses. The IRS should have guidance on that soon.

On the 20 percent business income deduction, there’s common-sense advice in a new Q&A published by REALTOR® Magazine. It’s based on a conversation with Peter Baker, a veteran CPA whose practice specializes in helping real estate agents and brokers. You can access that Q&A here.

The latest Voice for Real Estate news video from NAR also tackles the 20-percent deduction issue. Watch that segment here.