Pass through income

[austin3515]

I'm starting to worry more every day about the reduction of pass through income taxes to 20% nder the new proposals.  Would 100% of pass through income be subject to just 20%?  In other words, does that include Guarnateed Payments and the allocation of ordinary income?

ASPPA put out a piece where they brought up the issuye that if clients only get a deduction for 20% whent he money goes in and then it is taxed as ordinary income when they withdraw, they will likely be paying MORE tax on the way out, creating a huge disincentive to save.

I've seen some write-ups, but nothing on the nuts and bolts mechanics of what this would look like.

[401king]

On the bright side - It provides an incentive for Roth contributions. 

[Bird]

I think the house bill is at 25% and the senate at last review was 20%.  Yeah it's bad for plan formation for the reasons mentioned; I have some plans on the fence because of it.  (shrug - I try to react as an American and not a pension person.) 

I don't want to get too political but...well, the whole thing is utter nonsense, IMO.  They want to get rid of the estate tax, which affects something like 3500 people per year.  It's a windfall, and won't affect behavior.  Ditto the pass-through income; it's a windfall and won't change business creation behavior; it will just change the way people organize their businesses.  And the cynicism of throwing middle income people a bone and then having it go away after a few years is beyond disgusting.  It's ballyhooed as tax "reform" but it's really just another tax cut.  Has anyone noticed that we are in an expanding economy?  I know it's not expanding as rapidly as everyone might like, but what are they going to do if/when the economy goes south?  I know - a tax cut!!  A tax cut is the answer to absolutely every problem.  Now, I'll be one of the first to say that high taxes are indeed a drain on the economy, and maybe they are in fact too high.  But they're not high enough to support the spending that we are doing!  Have some b*lls and cut some spending.

[austin3515]

Closer to reality every day.  I woke up reading the notifications on my phone (about Senate passing their bill) thinking this must be the Bizaaro World episode of Seinfeld.  Wasn't it the Republicans who shutdown the government a "few"  years ago because of concerns over the deficit?  Right wrong or indifferent on the policies, it just seems like what used to be important enough to them to shut down the government for weeks is today just completely not a concern.  

[RatherBeGolfing]

So at a birdseye view, it looks like the senate version had pass through at 25% but excludes companies providing professional service.  That excludes most of my pass through clients from the QP/pass through dilemma.

[austin3515]

I think I remember seeing that now that you mention it.  I agree, it's the medical practices who are doing the "will my tax deductions pay for the staff contributions" math.

Let's see where this ends up...