Can anyone help me understand the pass through deduction, and how it works?
To keep things simple, let me try to present an example.
Suppose someone has a LLC or partnership that earns $100k in sales. After $25k in expenses, his final net income is $75k. That is his entire household income. So his household income is normally $75k on his tax return, thus putting all his income in the 10-15% brackets.
He pays no employees and all his money from the business account goes into his business account, and then he takes money from there to live on whenever needed.
Does such a person get any deduction from the 23% pass through rate? He doesn't officially pay any wages to anyone. But that's how he lives.
Its the pass through limited to the lesser of either 23% off your pass through income OR half your wages expense (whatever that means)?
So does he get any break at all?
Thanks