The Tax Cuts and Jobs Act (TCJA) made permanent and temporary changes to the tax rates for all entities and individuals. Among the permanent changes was the shift in the C corporation tax rate to a flat 21% beginning in 2018. For manufacturing entities that operate as a “pass-through” (i.e., sole proprietorship, partnership, and S corporations) their income is still passed down to the individual business owners. This means that the “tax-cut” did not cut the tax rate of pass-through entities directly. To help balance the scale, TCJA created a “qualified business income” (QBI) deduction through 2025. There are many hurdles to clear to enable you to take advantage of the QBI deduction, but if you meet all of the qualifications, you could take the full 20% deduction.
As we approach the summer months and the Tax Cuts and Jobs Acts is in full effect, we want to provide you with some additional information as it relates to rental real estate enterprises and the flow-through qualified business income deduction (QBID) for individuals.