• $20,000 (20% of business income); or
Service businesses include those in fields like health, law, consulting, athletics, financial services and brokerage services. It excludes engineering and architecture services, and other things like real estate and rental properties.
The new tax law’s provision on pass-through entities could provide substantial tax savings to both financial advisers and clients this year.
The Republican tax bill, which President Donald J. Trump signed into law Dec. 22, created a new section in the tax code — Section 199A — that provides a 20% tax break to some pass-through business entities.
The non-service-firm examples won’t apply to advisory firms themselves. But, they could be valuable for some advisers’ non-service-business-owner clients.
(More: Everything financial advisers need to know about the final bill)
Example 2: The same business owner now has total taxable income of $300,000 (which exceeds the phase-out income limit). The business pays $15,000 in wages but has no depreciable assets. The owner will exclude from tax the lesser of: