As a result of IRC Section 199A of the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS released its proposed reliance regulations on the 20% deduction for certain pass-through business income (definitions, computations, and anti-avoidance). For eligible businesses, this deduction is dependent on the following items:
There are six separate proposed regulations:
A public hearing has been set for October 16, 2018 before the proposals may become final.
HOW WILL IT AFFECT YOU?
The regulations will affect and may provide a 20% deduction for individuals, trusts, and estates (including partners in partnerships and shareholders in S-corporations) that receive QBI from US trades or businesses. QBI generally includes operating income and losses; QBI excludes capital gains and losses, dividends, guaranteed payments to a partner, and wages paid to an employee.
If the proposed 199A regulations remain as is and you are a pass-through owner doing business in other than the industries noted below, you may potentially lower your tax rate on qualifying income by a maximum 7.4%:
The pass-through deduction will likely not apply for the following industries referred to as specified service trades or businesses or SSTBs:
WHAT CAN A&M TAXAND DO FOR YOU?
The proposed regulations are highly complicated and may take considerable consultation before concluding on their impact. Still, some key questions may remain:
Closely monitoring & navigating the status of these proposed regulations in the coming weeks is key. Amidst this ever-changing regulatory environment, our Alvarez & Marsal Taxand team has the critical industry expertise and the advantage of an integrated team to successfully guide the way towards keeping compliant and attaining maximum tax benefits for you and your company.
To learn more about our services, visit: https://www.alvarezandmarsal.com/expertise/tax