Qualifying For The New Business Owner Tax Break
Under the new tax law, business owners are entitled to deduct 20% of "qualified business income." The test for qualifying a tax break on 20% of business income is defined in the Tax Cuts and Jobs Act (TCJA) and summarized here along with a simple illustration.
If you formed your BUSINESS as a sole proprietorship, S corporation, partnership, LLC or similar pass-through entity, you are entitled to the deduction. C corporations don't qualify for the 20% deduction. Only businesses generating income not taxed at the company level, but directly to the owner.
Qualified business income is the business' day-to-day, non-investment income. It's revenue the business generates minus expenses.
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