Revamped rules governing small business taxes may result in tax breaks for Georgia business owners. The Internal Revenue Service has proposed regulations that shed light on the qualified business income deduction, including which company owners might be able to claim the deduction. According to the rules, many small business owners can take a deduction of 20 percent of qualified business income.
Qualified business income means income earned by a company operating as an S-corporation, partnership or sole proprietorship. These business entity forms are sometimes referred to as pass-through with regard to taxation because company income is taxable to the owner; generally, the owner of the company reports company income on his or her personal 1040. There is a ceiling on the deduction. Small business owners can take the deduction up to an amount equal to 20 percent of taxable income less capital gains.
The deduction is available to business owners who have taxable income of $157,500 or less for an individual, or $315,000 for married people filing jointly. For business owners whose incomes exceed these thresholds, a partial deduction may apply. Some industries, called specified service trades, have higher thresholds. A healthcare provider, for example, might have a higher income threshold to take the deduction than another business owner.
In some cases, business owners with more than one business might have qualified income with regard to one or more operations and not the others. The regulations proposed by the IRS are not official until they’re published via the Federal Register. Individuals who have questions about the operation of the business tax laws might want to speak with a lawyer. A lawyer with experience in tax law may be able to help by examining the facts of the client’s situation and providing advice. A lawyer might be able to fight an IRS levy, draft and file necessary documents or communicate with government officials on the client’s behalf.