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Finance


increase in standard deductions, which almost doubled from $6,350 to $12,000 for single filers and rose from $12,700 to $24,000 for married couples filing jointly. Details of the 20 percent deduction promised by lawmakers to the nation’s numerous pass-through companies were unclear until early August, when the IRS released its interpretation of Congress’ intent, Section 199A. About 30 million U.S. businesses are


considered pass-through entities for tax purposes by the IRS, according to the Tax Foundation. Unlike corporations, which distribute their net income to sharehold- ers through dividends, pass-through busi- nesses pass their profits on to their own- ers —including musicians, landscapers, babysitters, farmers, restaurateurs, truck drivers, plumbers, carpenters, caterers and home-health aides, to name a few — as personal income. The IRS ruling states that all owners


of pass-through companies can take the hefty 20 percent deduction on their tax- able income if that amount is $157,000 or less for individual tax filers and $315,000 or less for couples filing jointly. If pass-


through business owners have taxable income above these totals, certain limita- tions on the 20-percent deduction begin to kick in. For example, accountants, attorneys,


physicians and performing artists own- ing pass-through entities earning above $157,000 or $315,000 are classified as a “specified service or trade businesses,” or SSTB. They are excluded from taking the 20 percent deduction. Pat Murtaugh, another


Murtaugh


partner with Brown Edwards in Roanoke, participated in a two-hour webinar with clients in September to learn more about how higher-earning owners of pass-through


companies can take full advantage of Sec- tion 199A. “With that comes now … a tremen-


dous amount of planning for people who are right around that [taxable income] threshold,” says Murtaugh. “What we can do as tax preparers is to get [our clients] below the threshold or look through the weeds to help make sure they can get part


of it [the deduction]. To get the deduc- tion, does that mean pushing income into next year or accelerating deductions?”


Who are ‘brokers’? Many tax professionals criticized


the original draft of TCJA as vague and imprecise. The legislation sparked many questions last spring about which types of pass-through companies and which types of business activities would qualify for the 20 percent deduction. Many s mall-business owners wanted to know if they should restructure as another type of pass-through company to increase their benefits. “There was some confusion across


the board. Specifically, which clients were able to use it or not,” says Monfalcone. “There was some confusion whether you could use it as a sole proprietor versus an LLC. They’ve cleared up those hurdles of confusion.” Earlier this year, Ryan Losi, execu-


tive vice president of the Piasick account- ing firm in Richmond, was telling his pass-through clients that it might take some months for the IRS to clarify what


BUSINESS SOLU T IONS


Capitalize on the “aha” moment.


Capital Bank connects your business with a team of experienced bankers who take the time to understand your needs. With a full range of financial services, we work with you to find the right solutions to help you capitalize on every opportunity. Let us help your business thrive.


Explore what we can do for you at CapitalBank-us.com/solutions or call 804-285-6600


©2018 First Tennessee Bank National Association operating as First Tennessee Bank and Capital Bank. Member FDIC.


62 NOVEMBER 2018


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