Author Topic: Trump-Republican tax plan, Bad for large families  (Read 138421 times)

Offline mr12

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Re: Trump-Republican tax plan bad for large families
« Reply #640 on: December 17, 2017, 09:02:41 PM »
can you explain it without using the word pass thru so we can learn what pass thru means
Pass through means the tax is on the shareholders portion of the income. It includes LLC, S Corp. As opposed to C Corp which is first taxed at corporate level and shareholder pays tax on dividends

Offline elit

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Re: Trump-Republican tax plan bad for large families
« Reply #641 on: December 17, 2017, 09:10:16 PM »
Pass through means the tax is on the shareholders portion of the income. It includes LLC, S Corp. As opposed to C Corp which is first taxed at corporate level and shareholder pays tax on dividends
so does this apply if I earn income on a 1099 without having any sort of Corp

Offline Dan

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Re: Trump-Republican tax plan bad for large families
« Reply #643 on: December 17, 2017, 10:10:59 PM »
They’re trying to get ppl to move out of blue states by removing the SALT deduction. Shrewd move by republicans.
It will simply turn the red States blue

Offline CPA

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Re: Trump-Republican tax plan bad for large families
« Reply #644 on: December 17, 2017, 10:21:42 PM »
Please elaborate. I tried reading it all and got a headache.
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments or income from a sole proprietorship (plain old Schedule C).
If your married filing jointly and earn over $415,000 (or Single over $207,500) you cannot take the 20% deduction.
If you make somewhere in between, than depending on what kind of business you have is how you determine what percentage of the 20% deduction you are allowed to take.

If someone has a different understanding please feel free to jump in.   

Offline churnbabychurn

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Re: Trump-Republican tax plan bad for large families
« Reply #645 on: December 17, 2017, 10:38:29 PM »
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments or income from a sole proprietorship (plain old Schedule C).
If your married filing jointly and earn over $415,000 (or Single over $207,500) you cannot take the 20% deduction.
If you make somewhere in between, than depending on what kind of business you have is how you determine what percentage of the 20% deduction you are allowed to take.

If someone has a different understanding please feel free to jump in.
Link to the actual text?

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #646 on: December 17, 2017, 10:51:35 PM »
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments or income from a sole proprietorship (plain old Schedule C).
Other than a Guaranteed payment, all other income that ends up on line 1 of a partnership k-1 will get a 20% deduction, regardless if you are active or passive?
Is this true, even if the partnership or s-corp does not pay wages (does not have employees)?  Originally in the senate bill, wasn't there some language about you needing to pay wages?

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #647 on: December 17, 2017, 10:58:54 PM »
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments or income from a sole proprietorship (plain old Schedule C).
If your married filing jointly and earn over $415,000 (or Single over $207,500) you cannot take the 20% deduction.
If you make somewhere in between, than depending on what kind of business you have is how you determine what percentage of the 20% deduction you are allowed to take.

If someone has a different understanding please feel free to jump in.

First line is good. However if you make over 315k you are only excluded if you're a "personal service businesses" i.e., accountants, doctors, lawyers, etc.
Other businesses not excluded, but the deduction is limited to the higher of 1) your share of the W-2 wages paid by the business, 2) 25% of your share of the W-2 wages paid by the business, PLUS 2.5% of the unadjusted basis (the original purchase price) of property used in the production of income.

See here for a good explanation
Quote
sole proprietors, S corporation shareholders, and partners in a partnership will be entitled to a deduction equal to 20% of their allocable share of business income.

As was the case in the Senate bill, however, the deduction comes with numerous caveats:

Generally, the deduction cannot exceed 50% of your share of the W-2 wages paid by the business.
Alternatively, the limitation can be computed as 25% of your share of the W-2 wages paid by the business, PLUS 2.5% of the unadjusted basis (the original purchase price) of property used in the production of income.
The W-2 limitations do not apply if you earn less than $157,500 (if single; $315,000 if married filing jointly).
Certain "personal service businesses" -- i.e., accountants, doctors, lawyers, etc... -- are not eligible for the deduction, unless their taxable income is less than $157,500 (if single; $315,000) if married.

In its simplest form, it works like this:

A is a 30% owner of a manufacturing S corporation. His share of income in 2018 is $700,000, and his share of the W-2 wages of the S corporation are $200,000. A is entitled to a deduction equal to the LESSER OF:

20% of $700,000, or $140,000, or
50% of his share of the W-2 wages of the S corporation, or $100,000.
Thus, A can take a deduction of $100,000 on his return.

Another example

assume A holds a large commercial building that he purchased seven years in an LLC he co-owns with two individuals. His share of the purchase price of the building was $5 million, and his share of the annual rental income is $1 million. The LLC pays no W-2 wages; rather, it pays a fee to a management company. Under the previous Senate bill, no deduction would be available to A against the $1 million of income because of the wage limitation.

The final bill, however, adds a new wrinkle: the ability to take the 20% deduction up to 25% of W-2 wages PLUS 2.5% of the original cost of business property.

Using the same facts as above, under the final bill, A is entitled to a deduction equal to the LESSER of:

20% of qualified income, or $200,000 ($1 million * 20%)
25% of W-2 wages ($0) plus 2.5% of A's share of the unadjusted basis of the building (2.5% * $5,000,000) = $125,000
« Last Edit: December 17, 2017, 11:02:00 PM by yitzf »

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Re: Trump-Republican tax plan bad for large families
« Reply #648 on: December 17, 2017, 11:02:02 PM »
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments or income from a sole proprietorship (plain old Schedule C).
When you say "plain old" are you excluding statutory employee schedule C?
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

Offline CPA

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Re: Trump-Republican tax plan bad for large families
« Reply #649 on: December 17, 2017, 11:08:17 PM »
@Yitz - you are correct. A "specified business" takes a percentage between 315 & 415 and excluded above that while other business are subject to adjustments above 315.

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #650 on: December 17, 2017, 11:14:19 PM »
How the total cuts have shifted throughout the process.
Negatives are tax cuts and positive are tax increases (all amounts in billions).

As you can see, in the final bill, Individuals are by far the greatest beneficiaries. (Corporate you need to net with International because the tax increases affect mostly corps)

HouseSenateFinal
Corporate/Business Tax Changes($846)($697)($653)
S Corp/Partnership/Sole Proprietorship Changes($448)($460)($414)
International Tax Changes$277$104$324
Estate Tax Changes($172)($94)($83)
Remaining Individual Tax Changes($224)($348)($629)
Total($1,413)($1,495)($1,456)

Source

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #651 on: December 17, 2017, 11:14:43 PM »
But under 315k, you will get an automatic 20% deduction, even if you pay zero wages?

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #652 on: December 17, 2017, 11:15:51 PM »
But under 315k, you will get an automatic 20% deduction, even if you pay zero wages?

Correct

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #653 on: December 17, 2017, 11:21:44 PM »
Link to the actual text?

http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf

Conference agreement for pass throughs starts on page 560 of the pdf.

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #654 on: December 17, 2017, 11:23:01 PM »
Correct
not sure why a partnership or s-corp without w-2 wages gets (deserves) a 20% deduction, while schedule c does not?

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #655 on: December 17, 2017, 11:24:17 PM »
not sure why a partnership or s-corp without w-2 wages gets (deserves) a 20% deduction, while schedule c does not?

Who said schedule c doesn't get?

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Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #657 on: December 17, 2017, 11:32:13 PM »
http://forums.dansdeals.com/index.php?topic=68913.msg1851492#msg1851492

It's missing a comma. Should read
If your married filing jointly and earn under $315,000 (or Single under $157,000) - you can deduct 20% of your net pass through income. Pass through income would include non wage income from an S Corp, income from a Partnership that is not Guaranteed payments, or income from a sole proprietorship

Offline good sam

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If you don't care why would you comment?
HT: DMYD

Offline Baruch

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Re: Trump-Republican tax plan bad for large families
« Reply #659 on: December 18, 2017, 12:22:54 AM »
Non refundable means that it reduces tax owed, but it stops at 0. Refundable means that even if you don't owe taxes you'll get a check for the remainder.
It's not really fully refundable. It's limited to 15% of income over 3k.
« Last Edit: December 18, 2017, 12:26:47 AM by Baruch »