New 20 Percent Pass-Through Tax Deduction: Can you Benefit? | Gordon

Tax Law: Final Word On 20 Percent Pass-Through and Substitute Options

image to accompany post about the 20 percent new tax deduction rateThey did it! Despite shutdown difficulties, the IRS finalized and published the 20 percent pass-through deduction rules. Analysts predict the new standards may slash some businesses’ taxes by a fifth.

In short, sects of real estate investors emerge as the big winners, while professional businesses may enjoy fewer deductions than past years.

Our firm develops substitute tax strategies that gel with the new rules. Give us a call to learn more about reducing your tax obligation. Meanwhile, below is a quick rundown of the 20 percent pass-through parameters.

More Clarification on New 20 Percent Pass-Through Tax Rule

Here’s a quick bullet point list of the pass-through winners and losers according to the latest notes.

  1. Veterinarians cannot take advantage of the new 20 percent pass-through rate.
  2. Professionals — lawyers, accountants, optometrists, et cetera — may be able to use the deduction, depending on how much they pay in wages, their property portfolio makeup, and the diversity of their income streams.
  3. Rental real estate owners, who work on their business — or hire someone to work on the business — for at least 250 hours a year, qualify for the deduction.
  4. Triple net lease property owners, which require lease investors to pay for maintenance and repairs, cannot use the deduction.
  5. Businesses that sell and originate mortgages can use the new pass-through withholding.
  6. Mutual fund shareholders, with interests in real estate, are cleared to use the 20 percent pass-through deduction.

Not everyone is thrilled with the new rules. Notably, taxpayers with multiple pass-through entities may have a mess on their hands, as the new standards will likely complicate their filings, leaving them more vulnerable to audits.

Note, however, that because of logistical hiccups, the Treasury Department is allowing businesses to choose between the new rules and the old this year. So, if you still need time to align your records with the new standards, you can stick with the old rules for your 2018 filing.

Can You Qualify For the New 20 Percent Pass-Through Deduction?

The main question: Can you take advantage of the new 20 percent pass-through rate? The rules are nuanced. So the best way to figure out where you stand is to consult with a tax attorney.

We’ll review your business to determine eligibility. And if you don’t qualify, we’ll help you develop mew strategies to replace the old.

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