Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...
The new 20% deduction for "pass-through" business owners under the Tax Cuts and Jobs Act is raising many questions from owners of real estate-related businesses. Can these owners qualify for this important deduction, and under what conditions?
For most pass-through business owners (such as owners of LLCs, Subchapter S corporations, and partnerships), the deduction is the lessor of (1) the "combined qualified business income" of the taxpayer, or (2) 20% of the excess of taxable income over the sum of any net capital gain. The term "combined qualified business income" is then defined ...