NJ Accounting Firm PNF CPA Talks Who Gets a New 20% Tax Break, a New Proposed regulations
Industry: Business
Last Week, the Treasury Department issued a sprawling regulation outlining the types of companies and professionals eligible to qualify as “pass-through” entities and get the 20 percent tax deduction. The widely anticipated rule has huge implications for law firms, real estate trusts, family farms and other companies that are structured so their profits are taxed as individual income
New Jersey (PRUnderground) August 22nd, 2018
A new 20 percent tax break proposed regulations This August, for a new provision allowing many owners of sole proprietorships, partnerships, trusts and S corporations to deduct 20 percent of their qualified business income.
The new deduction — referred to as the Section 199A deduction or the deduction for qualified business income — was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.
The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the littlest of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.
Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.
Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.
Tax expert Pishoy Fahmi, CPA, at PNF Certified Public Accountants & Advisors, is available to discuss the 20 percent deduction and the provisions of the new proposed regulations. CONTACT: PNF CPA
In addition, Notice 2018-64, also issued, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction. More information in the form of FAQs on Section 199A can be found on IRS.gov.
Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register.
Although these rules may have arrived too late for many taxpayers to engage in restructuring for current-year benefits, some businesses may be able to achieve more significant deductions in future tax years by making relatively minor changes to ownership or operations to satisfy the aggregation rules. Perhaps more important, however, business owners can take comfort knowing the Treasury Department has largely fulfilled its promise to apply the statute in a reasonable manner by limiting application of the SSTB exclusion and taking a holistic approach to defining qualified businesses.
Disclaimer: The news site hosting this press release is not associated with PNF CPA. It is merely publishing a press release announcement submitted by a company, without any stated or implied endorsement of the product or service. Please consult with a CPA or Tax attorney for all tax matters.
About PNF CPA
PNF CPA is here to break down the financial barriers to your success. We want to partner with you to not only provide accounting, bookkeeping and auditing services, but to also deliver detailed financial reports, budgets and projections you can rely on when reaching for your next goal.
