The 20% Pass Through Tax Break For Business Owners

Finally a tax break to help small business.  This will include anyone getting pass through income such as a sole proprietor, Sub S income, LLC, or LLP.  Individuals who earn income through pass-through businesses may qualify to deduct from their income tax an amount equal to up to 20% of their “qualified business income” (“QBI”) from each pass-through business they own.  QBI is the net income (profit) your pass-through business earns during the year.  It is essentially net income from your pass through businesses. QBI includes rental income so long as your rental activity qualifies as a business it will qualify too.

20% Deduction for Taxable Income Below $315,000 ($157,500 for Singles)

Now here is what I see as a planning point.  In the past it has always been beneficial to be an employee as opposed to a 1099 contractor.  With this 20% deduction most people would benefit from being a 1099 contractor.  Certainly worth taking a look at the total picture.  I’ll have more on this later.

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