We now have updated guidance on the the Tax Cuts and Jobs Act from the IRS.
As many of you know, there had been questions about if and how certain taxpayers—owners, partners, and shareholders in pass-through entities—could claim the 20% deduction on income.
The recent guidance clarifies two major things, which we’ve simplified here:
1. How companies with various lines of business can claim the deduction. Instead of having to restructure their business, as many thought they may need to do, companies can aggregate pass-through income from multiple sources as single business income.
2. Who cannot use the deduction. The law says that businesses which are based on the “reputation or skill” of the employer or owner are not able to take the deduction. That definition has been clarified to include people who have endorsement deals, licensing income, or appearance fees.
Other clarifications were also included in that piece of guidance. The law states businesses in certain industries are not allowed to take the deduction, and that still stands. That includes health, law, accounting, actuarial sciences, athletics, consulting, financial and brokerage services and the performing arts.
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Have more questions about how this affects you and your business? We’d love to help you plan for the future. Call us today at (513) 576-1989.