Tax planning under the TCJA for pass through entities is a post for small business owners everywhere paying US income taxes.
Now that the Tax Cuts and Jobs Act (TCJA) is in full swing, many of you have been clamoring for tax planning strategies. This post addresses some essential aspects of the Act and suggest some strategic implications to be used for planning purposes.
One of the most significant changes coming out of the TCJA are the new tax rates:
- The individual tax rate is reduced to a maximum 37%.
- The tax rate for pass-through entities can be reduced by 20%.
- The corporate tax rate is reduced from 35% to as low as 21%.
As a result of these new tax rates there is a growing debate over whether a business should be organized as a pass-through entity or a full blown ‘C’ corporation.