New Proposed Legislation Offers Small Business Tax Breaks

How the new proposal hopes to give tax breaks to smaller businesses

Known as the “pass-through deduction,” many corporations have used the 2017 deduction and have found tax break opportunities using complex tax strategies.

A pass-through business can be structured as possibly a limited liability company or a sole proprietorship, which passes income tax liabilities onto their individual owners instead of paying corporate income taxes.

Pass-through businesses account for 58% of all businesses with more than $50 million in receipts, and those filers received 61% of the 2017 benefit, according to a statement by Senate Finance Committee Chair Ron Wyden, D-Ore.

Small business owners have often been shut out of using the provision, due to the threshold.

There were also other caveats: Businesses including lawyers, accountants, dentists, and other professional services firms may take the deduction — but only up to the prevailing income threshold, which currently stands at $164,900, or $329,800 for joint filers.

Under the revised tax break, complicated categories and calculations used to determine which partnerships, limited liability companies, and other pass-through businesses qualify would be ditched. That then opens the deduction potentially to more businesses.

Sorting through the recent legislation and the new economic bill to come can be time-consuming and frustrating for business owners. It’s easier to delegate those tasks to a firm in the business of knowing how to navigate it all.

If you’re interested in a custom tax strategy for your business, contact the experts at Morgan & Associates today.