Dustin from Insight Tax explains the 2018 tax reform's 20% deduction on pass-through income. A business owner earning $100,000 now pays tax on only $80,000. The full benefit depends on income thresholds and wage tests, so you need a tax professional to get it right.
Hey guys, Dustin from Insight Tax here. Just wanted to talk to you real quick about some of the tax reform changes and how they can affect you. We're going to talk briefly about the pass-through income treatment. Pass-through income, what that refers to is if you have an S corporation or a partnership, this refers to the amount of income that is reported on your individual tax return that you pay tax on. Historically, you've had to pay tax on 100% of the pass-through net income. New tax reform gives you a 20% deduction on that flow-through. So an example would be if I had $100,000 of net income in my company, historically I've paid tax on $100,000. New tax reform starting in 2018 means I only pay tax on $80,000, or I get a $20,000 deduction. So this can be a real big benefit to a lot of small business owners, these S corp or partnership Uh, pass-through entities where the income reports to you individually. There's a lot of intricacies about, um, exactly how to make sure you get 100% of that extra deduction, you know, categories and income limits and wage tests and whatnot. Um, so it's going to be different for every single business owner, but please make sure to talk to us to make sure you can maximize that deduction to its fullest.
