{"id":2667,"date":"2018-02-10T16:39:58","date_gmt":"2018-02-10T21:39:58","guid":{"rendered":"https:\/\/blog.bradpine.com\/?p=2667"},"modified":"2018-02-10T16:51:55","modified_gmt":"2018-02-10T21:51:55","slug":"are-you-a-beneficiary-of-the-new-tax-reform-pass-through-business-deductions-find-out-here","status":"publish","type":"post","link":"https:\/\/blog.bradpine.com\/2018\/02\/10\/are-you-a-beneficiary-of-the-new-tax-reform-pass-through-business-deductions-find-out-here\/","title":{"rendered":"Are You a Beneficiary of the New Tax Reform Pass-Through Business Deductions? Find Out Here!"},"content":{"rendered":"<h4><img decoding=\"async\" loading=\"lazy\" class=\"alignleft wp-image-2668\" src=\"https:\/\/blog.bradpine.com\/wp-content\/uploads\/2018\/02\/Bradford-Pine-Wealth-Group-Garden-City-NY-300x210.jpg\" alt=\"\" width=\"317\" height=\"222\" srcset=\"https:\/\/blog.bradpine.com\/wp-content\/uploads\/2018\/02\/Bradford-Pine-Wealth-Group-Garden-City-NY-300x210.jpg 300w, https:\/\/blog.bradpine.com\/wp-content\/uploads\/2018\/02\/Bradford-Pine-Wealth-Group-Garden-City-NY-768x538.jpg 768w, https:\/\/blog.bradpine.com\/wp-content\/uploads\/2018\/02\/Bradford-Pine-Wealth-Group-Garden-City-NY.jpg 1000w\" sizes=\"(max-width: 317px) 100vw, 317px\" \/>Do you receive a 1099 or K-1? If so, the new tax rules under the 2017 tax reform effort could have a significant impact on your tax returns.<\/h4>\n<h4>The tax reform bill made significant changes to several parts of the tax code. One of the most talked about (not to mention confusing) applies to the owners of \u201cpass-through\u201d businesses, with a new 20% tax deduction on qualifying business income.<\/h4>\n<h4>What many people don\u2019t realize is that you can deduct <strong>up to <\/strong>20% depending on your business income and even the type of business you operate. Owners of service businesses will face important restrictions on their deductions.<\/h4>\n<h4>Given that many of my clients are business owners themselves, I\u2019ve put together some <strong>basic information<\/strong> about the new tax deduction and how it might apply to your service business.<\/h4>\n<h4>Of course, I need to lead with an important disclaimer: I am <u>not<\/u> a tax attorney or an accountant, and this article is <u>not<\/u> intended to give tax advice or to replace the advice of a qualified attorney or accountant. Before you make any decisions about your own tax return or business, be sure to seek the help of a professional.<\/h4>\n<h2><strong><span style=\"color: #000080;\">Are you subject to the new rules?<\/span> <\/strong><\/h2>\n<h4>If you operate a business or earn income as one of the following types of entity, the tax law changes could apply to you:<\/h4>\n<ul>\n<li>\n<h4>Sole proprietor<\/h4>\n<\/li>\n<li>\n<h4>Partnership<\/h4>\n<\/li>\n<li>\n<h4>Limited liability company (LLC)<\/h4>\n<\/li>\n<li>\n<h4>S Corporation<\/h4>\n<\/li>\n<\/ul>\n<h4>One of the key features of these business structures is that you <u>do not<\/u> have to file a corporate tax return. Instead, you get a K-1 from your company\u2019s accountant or 1099s from your clients and include that income on your personal income tax return.<\/h4>\n<h4>Now, if you own a <strong>service business <\/strong>\u2013 that includes many, doctors, lawyers, consultants, financial advisors, athletes \u2013 you won\u2019t just get to lob 20% off your business income on your tax return. Depending on your income, you may need to make some additional calculations, or forget about the deduction at all.<\/h4>\n<h2><span style=\"color: #000080;\"><strong>Figuring out your deduction<\/strong><\/span><\/h2>\n<h4>Service businesses are subject to income restrictions on deductions. In a nutshell, if you earn more than $207,500 from your business as a single filer or $415,000 as a joint filer, the new pass-through tax deduction will have phased out completely and you <u>will not<\/u> receive the benefit.<\/h4>\n<h4>More specifically:<\/h4>\n<ul>\n<li>\n<h4>If you earn less than $157,500 from your business as a single filer (less than $315,000 for joint filers), you\u2019ll likely be able to take the <strong>full deduction. <\/strong><\/h4>\n<\/li>\n<li>\n<h4>If you earn between $157,500 and $207,500 as a single filer ($315,000 to $415,000 for joint filers), you\u2019ll be subject to a scaled <strong>phase-out<\/strong> and your deduction will be reduced \u2013 talk to your accountant about how to figure out the exact number.<\/h4>\n<\/li>\n<li>\n<h4>If you earn above $207,500 as a single filer ($415,000 as a joint filer) <strong>and <\/strong>you operate a service business, you <strong>won\u2019t be eligible<\/strong> for the deduction.<\/h4>\n<\/li>\n<\/ul>\n<h4>The word qualified is important. If you earn both wages and pass-through income from your business, you can only take a deduction for the pass-through income.<\/h4>\n<h4>In other words, the deduction applies only to business income, not wages or compensation. That means if you earn $400,000 in wages and $125,000 in pass-through income, you\u2019ll still be able to take the full deduction on the $125,000.<\/h4>\n<h2><strong><span style=\"color: #000080;\">Start early<\/span> <\/strong><\/h2>\n<h4>Hopefully by reading this you have a rough sense of whether this deduction will apply to you \u2013 and how much math you\u2019ll have to do to figure out your potential deduction at the end of the year.<\/h4>\n<h4>But there are a number of complicated issues that still need to be addressed, especially if you have a complex business, several businesses, or other unique tax factors. In my opinion, <strong>the best thing you can do is to start early<\/strong> with navigating the new rules so that you have time to get help, answer questions, and figure out what you need to do to get the most benefit from the new rules.<\/h4>\n<h4>Also keep in mind that if you do qualify for the pass-through tax break, you may have lost out on others (for example, with state and local tax deductions). That\u2019s why it\u2019s important to put this calculation together with the other updated rules, which may or may not apply to you \u2013 this will give you a more complete picture of your 2018 tax position.<\/h4>\n<h4>In other words, don\u2019t wait to reach out to your tax advisor. It could save you a lot of stress and confusion later on!<\/h4>\n<h4>\u00a0<em>\u00a0<\/em><\/h4>\n<h4><em>Written by <a href=\"http:\/\/www.bradfordpinewealth.com\/About-Bradford-Pine.5.htm\" target=\"_blank\" rel=\"noopener noreferrer\">Bradford Pine<\/a> with Anna B. Wroblewska<\/em><\/h4>\n<p><strong>\u00a0<\/strong><\/p>\n<h4><span style=\"color: #000080;\">More information about the pass-through deduction:<\/span><\/h4>\n<p>Limits to the deduction: <a href=\"http:\/\/www.cpapracticeadvisor.com\/news\/12389903\/2018-tax-reform-pass-through-income-deduction-more-complex-than-thought\" target=\"_blank\" rel=\"noopener\">http:\/\/www.cpapracticeadvisor.com\/news\/12389903\/2018-tax-reform-pass-through-income-deduction-more-complex-than-thought<\/a><\/p>\n<p>Calculating your deduction, the simple version: <a href=\"https:\/\/www.forbes.com\/sites\/kellyphillipserb\/2017\/12\/22\/what-tax-reform-means-for-small-businesses-pass-through-entities\/#1b5a262c6de3\" target=\"_blank\" rel=\"noopener\">https:\/\/www.forbes.com\/sites\/kellyphillipserb\/2017\/12\/22\/what-tax-reform-means-for-small-businesses-pass-through-entities\/#1b5a262c6de3<\/a><\/p>\n<p>Section 469 issues: <a href=\"https:\/\/www.crowehorwath.com\/insights\/tax-alert\/tax-news-highlights-pass-through-entity-deduction-calculation.aspx\" target=\"_blank\" rel=\"noopener\">https:\/\/www.crowehorwath.com\/insights\/tax-alert\/tax-news-highlights-pass-through-entity-deduction-calculation.aspx<\/a><\/p>\n<p>Impact on state taxes: <a href=\"https:\/\/taxfoundation.org\/pass-deduction-wont-flow-states\/\" target=\"_blank\" rel=\"noopener\">https:\/\/taxfoundation.org\/pass-deduction-wont-flow-states\/<\/a><\/p>\n<p>AGI: <a href=\"https:\/\/www.irs.com\/articles\/adjusted-gross-income-agi-vs-modified-adjusted-gross-income-magi\" target=\"_blank\" rel=\"noopener\">https:\/\/www.irs.com\/articles\/adjusted-gross-income-agi-vs-modified-adjusted-gross-income-magi<\/a><\/p>\n<p>&nbsp;<\/p>\n<p><span class=\"embed-youtube\" style=\"text-align:center; display: block;\"><iframe loading=\"lazy\" class=\"youtube-player\" width=\"600\" height=\"338\" src=\"https:\/\/www.youtube.com\/embed\/6RwE-Gw_E-s?version=3&#038;rel=1&#038;showsearch=0&#038;showinfo=1&#038;iv_load_policy=1&#038;fs=1&#038;hl=en-US&#038;autohide=2&#038;wmode=transparent\" allowfullscreen=\"true\" style=\"border:0;\" sandbox=\"allow-scripts allow-same-origin allow-popups allow-presentation allow-popups-to-escape-sandbox\"><\/iframe><\/span><\/p>\n<p>To learn about retirement savings, download my free eBook, \u201c<a href=\"..\/..\/..\/..\/..\/10-tips-you-need-to-know-about-your-ira-rollover\/\" target=\"_blank\" rel=\"noopener noreferrer\">10 Tips You Need to Know About Your IRA Rollover<\/a>.\u201d This short book is packed with critical information that will help you make the right decisions about your retirement savings.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Do you receive a 1099 or K-1? If so, the new tax rules under the 2017 tax reform effort could have a significant impact on your tax returns. The tax reform bill made significant changes to several parts of the tax code. One of the most talked about (not to mention confusing) applies to the [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[169],"tags":[1207,1201,1199,207,456,1206,1204,1203,1200,1205,1202,1122],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2p1nA-H1","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":2173,"url":"https:\/\/blog.bradpine.com\/2013\/10\/30\/short-video-2013-tax-changes-and-your-year-end-planning\/","url_meta":{"origin":2667,"position":0},"title":"Short Video:  2013 Tax Changes That You Should Know!","author":"Bradford Pine","date":"October 30, 2013","format":false,"excerpt":"There are a few important changes in the 2013 tax year that may have a significant effect on your tax planning. You may have heard about the new tax brackets and tax rates for higher earners, but there have also been changes for individuals across most tax brackets. You can\u2026","rel":"","context":"In &quot;Tax Tips&quot;","block_context":{"text":"Tax Tips","link":"https:\/\/blog.bradpine.com\/category\/tax-tips\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":598,"url":"https:\/\/blog.bradpine.com\/2011\/01\/25\/summarization-of-the-health-insurance-reforms-scheduled-to-take-effect-in-2011\/","url_meta":{"origin":2667,"position":1},"title":"Summarization of the Health Insurance Reforms Scheduled to Take Effect in 2011","author":"Bradford Pine","date":"January 25, 2011","format":false,"excerpt":"Summarization of the Health Insurance Reforms Scheduled to Take Effect in 2011 The Patient Protection and Affordable Care Act (PPACA), signed into law in 2010, makes significant changes to our health care delivery system. Some of these reforms took effect in 2010 while many others take place in 2011. The\u2026","rel":"","context":"In &quot;Health Insurance Reform&quot;","block_context":{"text":"Health Insurance Reform","link":"https:\/\/blog.bradpine.com\/category\/health-insurance-reform-2\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":678,"url":"https:\/\/blog.bradpine.com\/2011\/03\/16\/theres-still-time-to-contribute-to-an-ira-for-2010\/","url_meta":{"origin":2667,"position":2},"title":"There&#8217;s Still Time to Contribute to an IRA for 2010","author":"Bradford Pine","date":"March 16, 2011","format":false,"excerpt":"\ufeff There's still time to make a regular IRA contribution for 2010! You have until your tax return due date (not including extensions) to contribute up to $5,000 for 2010 ($6,000 if you were age 50 by December 31, 2010). Normally, your tax return must be filed by April 15.\u2026","rel":"","context":"In &quot;Retirement Planning&quot;","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1536,"url":"https:\/\/blog.bradpine.com\/2011\/12\/01\/six-tips-for-improving-your-tax-efficiency-2011-2012\/","url_meta":{"origin":2667,"position":3},"title":"6 Tips for Improving Your Tax Efficiency 2011 &#8211; 2012","author":"Bradford Pine","date":"December 1, 2011","format":false,"excerpt":"December is a great time of year to visit family, enjoy holiday meals, and streamline April\u2019s tax bill. With a bit of knowledge, you can really boost the tax efficiency of your portfolio and even your gift giving, so this month I\u2019d like to share a few simple tips for\u2026","rel":"","context":"In &quot;Tax Tips&quot;","block_context":{"text":"Tax Tips","link":"https:\/\/blog.bradpine.com\/category\/tax-tips\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2066,"url":"https:\/\/blog.bradpine.com\/2012\/12\/03\/2012-investment-and-tax-planning-while-approaching-the-edge-of-the-fiscal-cliff\/","url_meta":{"origin":2667,"position":4},"title":"2012 Investment and Tax Planning While Approaching the Edge of the Fiscal Cliff","author":"Bradford Pine","date":"December 3, 2012","format":false,"excerpt":"There is a lot of talk in the financial news about the coming \u201cfiscal cliff\u201d and its potential ramifications for investing, financial planning, tax planning, and estate planning. While there is a lot of speculation about what might happen in the coming weeks and how to plan ahead, investors still\u2026","rel":"","context":"In &quot;Fiscal Cliff&quot;","block_context":{"text":"Fiscal Cliff","link":"https:\/\/blog.bradpine.com\/category\/fiscal-cliff\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":139,"url":"https:\/\/blog.bradpine.com\/2010\/06\/09\/roth-ira-rollover-or-not\/","url_meta":{"origin":2667,"position":5},"title":"Roth IRA Rollover or Not?","author":"Bradford Pine","date":"June 9, 2010","format":false,"excerpt":"A key component to successful investing is determining how to position assets for maximum return after taxes.\u00a0 It matters not what you make; it matters what you keep.\u00a0 Did you know that as of January 2010 you are able to convert your Traditional IRA to a Roth IRA, regardless of\u2026","rel":"","context":"In &quot;Roth IRA&quot;","block_context":{"text":"Roth IRA","link":"https:\/\/blog.bradpine.com\/category\/roth-ira\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/2667"}],"collection":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/comments?post=2667"}],"version-history":[{"count":0,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/2667\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/media?parent=2667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/categories?post=2667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/tags?post=2667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}