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Tax Cuts and Jobs Act

Date: 1/8/2018

Business provisions

Corporate rate. The Act provides for a flat 21 percent corporate rate, rather than the originally proposed 20 percent rate. There is no separate rate for personal service corporations. The 21 percent rate becomes effective for tax years beginning after Dec. 31, 2017.

Corporate AMT. The corporate AMT is repealed. Prior-year minimum tax credits may offset a taxpayer’s regular tax liability for tax years beginning after 2017, subject to a formula.

 

Business income deduction for pass-through business entities. The Act provides for a 20 percent deduction for domestic qualified business income from a partnership, S corporation or sole proprietorship. The deduction does not apply to specified service businesses, except in the case of a taxpayer whose taxable income is below the threshold amount. Under the conference agreement, the threshold amount is $157,500 (twice that amount or $315,000 in the case of a joint return). The conferees expect the reduced threshold amount will serve to deter high-income taxpayers from attempting to convert wages or other compensation for personal services to income eligible for the 20 percent deduction under the provision. The conference agreement provides that the range over which the phase-in of these limitations applies is $50,000 ($100,000 in the case of a joint return).

A specified service trade or business means any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests or commodities.