Here’s Adam Bergman’s latest article from Forbes.com that talks about the new pass-through tax deduction and how small business owners can take advantages of it –
One of the most controversial and complex aspects of the 2017 Tax Cuts and Jobs Act is the application of the 20% pass-through tax deduction, which was codified as Internal Revenue Code (“IRC”) Section 199A.
The new pass-through tax deduction applies to all pass-through entities. The most common types of pass-through entities are limited liability companies (“LLC”), S corporations, partnerships, and sole proprietorship. In other words, most of the popular business forms other than a C corporation.
Pursuant to IRC Section 199A(d), the pass-through deduction will generally only apply to “Qualified Business Income” sourced in the U.S. or Puerto Rico that is not generated by a specified service trade or business or any business where an individual would be providing services as an employee. A specified service trade or business is: (a) a service business in the health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, and brokerage services; (b) a business where the primary asset is the reputation or skill of one or more of its employees or owners; or (c) a business involving investment or investment management service involving trading.