THE TAX CUTS & JOBS ACT: NEW DEDUCTION FOR NONCORPORATE TAXPAYERS FOR QUALIFIED BUSINESS
Baker Peterson Franklin will be providing a series of articles regarding the tax reform changes.
The Tax Cuts and Jobs Act adds a new deduction for noncorporate taxpayers for qualified business income (also referred to as the "pass-through deduction"). The deduction is generally 20% of a taxpayer's qualified business income from a partnership, S Corporation or sole proprietorship, defined as the net amount of items of income, gain, deduction, and loss with respect to the trade or business. Certain types of investment-related items are excluded from qualified business income, e.g., capital gains or losses, dividends, and interest income (unless the interest is properly allocable to the business). Guaranteed payments to a partner and wages paid to a shareholder are also excluded. Taxpayers whose taxable income exceeds the threshold amount of $157,500 ($315,000 in the case of a joint return) are also subject to limitations based on W-2 wages paid by the business and
the business' unadjusted basis in acquired qualified property. More