New Pass-Through Deduction Presents Tax Planning Opportunities for Pass-Through Business Owners

The Tax Cuts and Jobs Act will dramatically change how income is taxed for business owners of pass-through entities, such as certain partnerships, limited liability companies, and S corporations. As of January 1, 2018, owners of pass-through entities may deduct up to 20 percent of their “qualified business income” from their taxable income each year. This creates huge incentives for business owners to organize their business as “pass-through” entities. This article breaks down how the pass-through deduction works and what types of businesses may benefit.