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The New Act

The "Big Winners" of The New Act
The “Big Winners” of The New Act

The “Big Winners.”

We are one month away from the end of the first year under The Tax Cuts and Jobs Act of 2017 (the “New Act”). In prior articles we discussed that the tax rate for C-Corporations was reduced from 35% to 21% clearly making all 1.7 million of the C-Corporations strong contenders for the “Big Winners” First Place Award 1. We also discussed the Impact on the 141.2 million Individual Taxpayers whose tax rate was reduced from 39.6% to 37% 2. Individuals also saw their state and local tax deduction limited to $10,000.

In this Holiday Edition we discuss how the New Act treats “pass-through” entities such as Sub S Corporations, Limited Liability Companies, Partnerships and Sole Proprietorships 3. Then we will conclude by announcing the “Big Winners” under the New Act.

The New Act was advertised as legislation intended to provide tax code “Simplification” and “Middle-Class Relief”.

The New Act changes the tax structure for “pass-through” entitles by providing a new deduction of up to 20% of “Qualified Business Income” or the “operating profits” of a Trade or Business. New Code Section 199A contains all the complicated rules governing this deduction including income limits for the phasing out of the deduction for certain Specified Service Businesses including most professional service providers. This reduces the effective tax rate for “pass-through” entities from 39.6% to 29.6%. Read more