We are optimistic the changes forthcoming to the tax code will be positive for the business owner.
Much talk in the press and even in accountants forums, is that the advantage for “flow throughs” (funny, every time I write “flow-throughs” spell check comes up), is limited by thresholds of $315,000, married filing jointly, and $157,500 for other filers, We believe, and I think the Wall Street Journal confirms this morning, that those limitations apply only to Selected Services Businesses, (SSBs) Specified Service Business defined as a trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees. (Architects do not fall into this description).
Therefore most “flow-throughs will get the benefit of a 20% reduction in taxable income resulting in a reduced rate of 29.6% (assuming the taxpayer is in the maximum tax bracket) on that income. This is a direct benefit to the business owner. In spite of the loss of the state and local income and real estate taxes, this reduction in income may offset the loss of those deductions resulting in the same taxable income at a lower rate. Of course, the business must be properly structured to achieve these benefits.
What do you think of the new tax legislation?
Feel free to comment below to potentially have your question answered.
-Keith
