Pass-Thru Income Deduction
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Pass-Thru Income Deduction
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Re: Pass-Thru Income Deduction
#2One of the worst things about the current tax code (and soon-to-be new tax law) is the cost of compliance. You can argue about high tax or low tax and who should pay more than whom, but cost and time to comply does not create any value and is an artificial way that we make our country less competitive.
This article is a clear example of that, laying out 10 different things you need to know with complicated formulas for deduction and professions that do and do not get benefits. What a mess.
Re: Pass-Thru Income Deduction
#3Should everyone be thinking of becoming a pass through business? Person Inc. works for Big Business Inc. Everybody pays 20% tax and we are all happy.
Re: Pass-Thru Income Deduction
#4This was a handy guide. I learned something. I was under the assumption the 20% deduction was only on the income you took as a distribution, NOT all of the income.
I literally jumped for joy... then I read #5, and had a sad. I still come out better than I originally thought, but not as good as #4 led me to believe.
Re: Pass-Thru Income Deduction
#5Should everyone be thinking of becoming a pass through business? Person Inc. works for Big Business Inc. Everybody pays 20% tax and we are all happy.
This handy guide lays out some ways that the legislators in their wisdom have sought to curb this understandable impulse. E.g. the allowable deduction is proportional to regular wages paid by the pass-thru business. So you can only take deductions on income of Person Inc if Person Inc also pays wages that are taxed at regular rates. Provisions like that will keep the tax accountants busy.
Re: Pass-Thru Income Deduction
#6One of the worst things about the current tax code (and soon-to-be new tax law) is the cost of compliance. You can argue about high tax or low tax and who should pay more than whom, but cost and time to comply does not create any value and is an artificial way that we make our country less competitive. This article is a clear example of that, laying out 10 different things you need to know with complicated formulas f…
This. I think I would be willing to pay a higher total flat tax if it was just simpler.
Right now, I spend a few thousand/year and an annoying amount of time to make sure I'm doing it right.
Re: Pass-Thru Income Deduction
#7Should everyone be thinking of becoming a pass through business? Person Inc. works for Big Business Inc. Everybody pays 20% tax and we are all happy.
I might be wrong but I think that tax rate is not 20%.
I think the deduction is 20%. If I understand it correctly then what it means is that if you have earned $100k then you are taxed only on $80k and 20% (20K in this case) is your deduction.
Can someone confirm/deny it.
Re: Pass-Thru Income Deduction
#8Thanks for posting this, I have been looking for just such a summary. I think I will be a significant beneficiary of this provision (as I currently understand it, anyway), but I agree with other commenters that I wish we could just make things simpler and more fair.
Over the last 10 years I have had experience with small business taxes, small business retirement plans, and various estate-tax avoidance schemes. The tax code is a joke. It rewards people who have the resources to game it, and it employs an entire class of people who specialize in doing just that. Its demoralizing, but while it exists, everyone has to play the game.
Edit: Also, that same site has an even more detailed summary of the deduction here:
https://evergreensmallbusiness.com/sec-199a-qualified-busine...
Re: Pass-Thru Income Deduction
#9Should everyone be thinking of becoming a pass through business? Person Inc. works for Big Business Inc. Everybody pays 20% tax and we are all happy.
I might be wrong but I think that tax rate is not 20%. I think the deduction is 20%. If I understand it correctly then what it means is that if you have earned $100k then you are taxed only on $80k and 20% (20K in this case) is your deduction. Can someone confirm/deny it.
90% confirm.
If your company earned $100k, and paid you $50k, you can deduct 20% of the 100k capped at 20% of your ordinary income ($50k), for a total deduction of $10k.
Re: Pass-Thru Income Deduction
#10Should everyone be thinking of becoming a pass through business? Person Inc. works for Big Business Inc. Everybody pays 20% tax and we are all happy.
I might be wrong but I think that tax rate is not 20%. I think the deduction is 20%. If I understand it correctly then what it means is that if you have earned $100k then you are taxed only on $80k and 20% (20K in this case) is your deduction. Can someone confirm/deny it.
Yes, it is a deduction of 20%.