The US Congress is on the verge of passing a major tax bill that looks like it is going to have an impact on just about everyone who lives and/or pays US taxes. I am not an accountant nor do I have any tax expertise, but based on what I have been reading, watching, and observing, it seems like this bill will be good for domain investors who reside in the US and pay taxes here.
There are three reasons why I think the bill could end up being a positive for US-based domain name investors:
- Tax deduction for pass through entities – It looks like people who generate revenue via pass through entities (such as LLCs) will see the tax rate on this income decreased. Many domain investors I know operate LLCs and the majority of their domain investment income is generated in this manner. Lower taxes on this particular type of income should mean more money in the bank for investments.
- Lower taxes on corporations could lead to more money for domain acquisitions – It seems like corporations will have lowered tax rates to help spur spending. Some of this spending might come in the form of buying a great business domain name. In addition, the savings that smaller businesses receive because of the pass through rate deduction might lead to additional strategic domain name acquisitions.
- Higher income individuals will pay less – From what I have observed, this has been a pretty good year for domain investors. This tax bill appears to benefit higher income earners. Many domain investors would likely qualify as high income earners and will presumably benefit from this tax bill.
From what I have read, it seems like the majority of Americans are opposed to the tax bill. From my vantagepoint – and without much tax preparation experience beyond keeping very good records I send to my accountant each year – it does look like US based domain investors could benefit. Of course, there are many more considerations to be made beyond how this bill could help US-taxpayers, but this is just some quick thoughts about the bill as it will impact domain investors and their income.
You are welcome to comment about my thoughts regarding taxes on domain investors operating businesses, but please keep things civil.
Great post. I like your theory on lower corporate taxes leading to more domain acquisitions next year. Very plausible, unless the CEO, BOD and other executives take the extra cash reward themselves instead. You should revisit this post next December to compare DN Journal public domain sales from 2017 to 2018. Generally, DotWeekly does a good job of tracking corporate domain name acquisitions. Would be interesting to see the results…
It would be great to hear about how a domain investors corporation type effects their tax exposure and makes a domain-holding corporation more or less survivable.
LLCs can have tax advantages, but this type of corporation is limited to having at least two owners. If one owner leaves or passes away, then my understanding is that the LLC must be dissolved. Would another type of corporation offer greater survivability options, without significantly raising an owners tax liabilities?
What recommendations might people have on how to set up a domain-holding corporation that can be passed on, intact, to ones heirs?
Anthony Mitchell, there are Single Member LLC entities. So your information is not correct.
“LLCs can have tax advantages, but this type of corporation is limited to having at least two owners.”
That isn’t accurate. See this page on the IRS website about single member LLC companies: https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
Thank you Tim Adkins and Elliot.
Great article Elliot. This would be a great topic on my DomainBlawg website….if I could ever find the time to get it up and running.
I agree 100%.
I’m not a republican, I didn’t vote for Trump, and frankly I’ve opposed the majority of his agenda.
But I have to say…@denn tax bill looks . Economically I could not equate a solution to the bubble the nation is in. I thought for sure recession was just around the corner. This bill could potentially stave off that recess.
I think Elliot’s post is right on, but in terms of the tax cut’s effect on the country as a whole, you might want to consider https://www.paulcraigroberts.org/2017/12/04/plunder-capitalism