The passing of the Tax Cuts and Jobs Act in December 2017, especially the new Internal Revenue Code Section 199A, has created a lot of buzz in the business community. In simple terms, the new provision allows pass-through entities (Sole Proprietorships, S Corporations, and Partnerships) to deduct 20% of the earned business income on the owner’s individual tax return. However, with tax law, nothing is that simple, as there are many exceptions and income limitations. There remains many unanswered questions, as little to no guidance has been released from the Internal Revenue Service to date.
After reading it, you will come to realize that this deduction is applied on a case-by-case basis – there will be some winners and losers. Over the next few months, your tax advisor will be contacting you to discuss the deduction as it applies to you, as the business owner. In the meantime, if you have any questions regarding the new tax act, please do not hesitate to contact us.