Tax Reform Tuesday: Pass-Through Deductions—What You Need To Know

Written on February 27, 2018

While corporations are benefiting in many ways from Tax Reform, we don’t want to forget about businesses operating as pass-through entities. There is now a new pass-through deduction that will keep up to 20% of pass-through entities’ business income from being taxed. This will reduce the effective rate on pass-through income to 29.6% for high-income taxpayers.

One thing to note – this deduction is up to 20% of income. There are many exclusions and limitations for high-income taxpayers, which is defined as over $207,500 for single and $415,000 for married filing jointly taxpayers. High-income taxpayers will likely get less than a 20% deduction due to the limitations. In addition, high-income taxpayers in a service business will not qualify for this deduction at all. The devil is in the details with this deduction, so it’s important to go through all steps if you are a high-income taxpayer.

Warren Averett is ready to walk with you through these steps. If you have questions about how tax reform will affect you or your business, contact your Warren Averett Advisor, today.

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