Modified Document Construction Business Owners Can Benefit from the Qualified Business Income Deduction
By Ivan H. Golden, Hahn Loeser & Parks LLP
The Tax Cuts and Jobs Act of 2017 created a lucrative new tax incentive for certain business owners: the ability to deduct up to 20% of their qualified business income. Thus, a business owner who qualified for the deduction could earn taxable income of $500,000 but pay tax on as little as $400,000, resulting in tax savings of nearly $40,000.
Like nearly all provisions of the tax code, however, the deduction is subject to myriad exceptions, limitations, and special rules. Among other things, the deduction is reduced or even eliminated depending on the owner’s income, the nature of the business, how the business is organized (the deduction is only available to passthrough businesses such as partnerships, S corporations, and sole proprietorships), how much the business pays in wages, and how much property it uses."