The U.S. Treasury Department has provided additional details on the tax deduction for pass through businesses introduced under the Tax Cuts and Jobs Act (a.k.a. tax reform). In general, owners of partnerships, S corporations, limited liability companies and sole proprietorships with taxable income of $315,000 or less for joint filers and $157,500 or less for single filers are eligible for a 20% deduction on their income. At higher income levels, the deduction is subject to phase-outs and limits. The new guidance also clarified which types of businesses are excluded from the deduction, including owners of ‘specified service’ businesses with higher revenue potential. Such excluded business owners include doctors, dentists and pharmacists; lawyers; accountants and actuaries; consultants; performing artists; financial advisers and investment managers; and athletes and coaches, including team owners.
If you have questions in regard to this and other provisions of tax reform, please contact our New York City accounting firm.