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The New "Pass-Through Deduction" (U.S. Taxes)


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Forbes.com: “The Tax Cuts and Jobs Act – signed into law on December 22, 2017 — gave birth to a brand new provision: Section 199A, which permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of the income earned by the business.”

I know it’s only August, but most of us have to think about taxes all year long (especially if you are self-employed). If you live in the United States, the Pass-Through Deduction is worth looking into.

I’m not a tax expert, so I’ll include the words of taxpolicycenter.org:

February 2018:
"The Tax Cuts and Jobs Act (TCJA) creates a new tax deduction of up to 20 percent of income from partnerships, sole proprietorships, and other pass-through businesses. But the size of the deduction varies, depending on the nature of the business activity and the total income of its owner. "

“Singles making less than $157,500 or joint filers making less than $315,000 in total taxable income may take the full 20 percent deduction on their pass-through income. For them, it does not matter if their business is a personal service firm or something else.”

Other reading material:

  • Nolo: “Under the Tax Cuts and Jobs Act, pass-through business entity owners can potentially deduct 20% of their business income.”
    *MileIQ: “If you qualify, you can deduct from your income taxes up to 20 percent of your business income. This effectively reduces your income taxes by 20 percent.”

It’s confusing, but some people here probably qualify for it and it could save you a lot of money on your next tax return, so I figured I’d share. 😄

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