4 ms·
Didn't the House version support pass through entities but the Senate version threw it out to reduce the deficit (to avoid filibuster)? Still waiting to see wha
by nightski 9y ago
Didn't the House version support pass through entities but the Senate version threw it out to reduce the deficit (to avoid filibuster)? Still waiting to see what the rectified version looks like.
- scarmig 9y agoWell, the rectified version will be finished at 11:30PM some long Friday night and passed at 11PM the same evening, so you really won't have much a chance to look at it beforehand.
- ryanwaggoner 9y agoNope. The House version is fairly complicated, but amounts to most non-service businesses treating 30% of the income as "capital return" and being taxed at 25%. The Senate plan started out as being a 17% deduction of pass-through income on 1040, and then got ramped up to 23% before being passed. It is limited to 50% of W2 wages paid by the pass-through and excludes a bunch of service industry categories, but both of those limitations only apply to businesses where taxable income is below $250k single / $500k married. I'm pretty aggressive on tax avoidance and even I'm surprised by how crazy this is. So in a hypothetical example, I'm married and earn $600k from a consulting business. After retirement contributions to a solo 401k, maybe some charitable / mortgage / property tax deductions, etc, I get my taxable income to $500k. Which means I get to deduct another 23% of the business income (23% x $600k = $138k), dropping my taxable income to $362. And the Federal income tax on that is $80k. Plus another $40k or so for SE tax. So $120k in Federal tax on $600k in income, or 20%. If you live in a no-tax state, then that's all you pay. That's pretty crazy.