Business owners with pass-through entities — including sole proprietorships, S-corporations and partnerships — may be entitled for a new 20 percent deduction on qualified business income on their 2018 tax return.
Entrepreneurs with taxable income below $157,500 if single or $315,000 if married and filing jointly may qualify.
Limitations to the tax break kick in over those taxable income thresholds.
For instance, “specified service trades or businesses,” including doctors, lawyers and accountants, can’t take the deduction at all if their taxable income exceeds $207,500 if single, or $415,000, if married.
The IRS has spent most of 2018 and part of January 2019 fine-tuning the deduction.
Even tax software providers have run into difficulty incorporating last-minute changes to the deduction, which led to some hiccups with accountants’ tax prep programs.
“You have taxpayers who are in more complex situations with the impact of all of these changes, and it’s causing practitioners to have to extend those returns more than they normally do,” said Edward Karl, CPA and vice president of taxation for the American Institute of CPAs.