New tax legislation, which President Trump will likely be signing into law in the coming days, eliminates the 20 percent pass-through income deduction for what the law refers to as a “specified service trade or business.” These specified service providers include accountants, lawyers, health professionals, as well as other trades or businesses where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners. Individuals within these specified trades or businesses with taxable income below $157,500 and couples filing jointly with taxable income below $315,000 will still qualify for the 20 percent pass-through income deduction. The limitations phase in over the next $50,000 of taxable income. For example, a lawyer who files individually, for example, would be unable to take any deduction at all when her taxable income reaches $207,500.
This new tax legislation is an opportunity for businesses to plan and restructure to maximize profitability. Abedian + Totlian will guide you and your business during this time of change for a prosperous 2018!
Note: In the final tax bill, architects and engineers did not make the list of disallowed industries, so the exclusion does not apply for them.