From the course: Business Tax Foundations
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The pass-through tax break
- [Narrator] The best thing to happen to taxes in recent years for many business owners is the new Pass-Through Tax Deduction that came as part of the 2017 Tax Cuts and Jobs Act. This new provision provides a 20% deduction on qualified business income. This deduction is taken on the individual's tax return from taxable income and can result in the flow through of income from a sole proprietorship, or a partnership, or an S-Corp. So, this is a great way to reduce your overall taxable income, but you have to meet certain criteria. In particular, you have to be a qualified business and you have to be in a qualified type of business in order to get this pass-through tax deduction. The pass-through tax deduction was setup to benefit manufacturers in particular. So in general if you're in a trade, if you're providing a service, you're probably not going to be eligible for the pass-through deduction. It varies a little bit so you'll want to check with your accountant to be sure, but in…
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