Who can use the new business tax deduction?
Recent reforms in the tax code will be a significant benefit for small business owners who claim company income on their personal tax returns, according to The New York Times.
When income is declared in this way, it is called pass-through income, and the legislation will impact as many as 40 million taxpayers with small businesses making up almost half that number and ‘non-business’ individuals making up the rest. In many cases, a full 20 percent of all pass-through business income will be deductible, and further changes to deductions for depreciable property can help certain types of businesses as well.
Individuals that operate sole proprietorships and contract out to other companies, as well as people that claim income from things like hobbies or vacation home rentals, will fall into the non-business category. Even before these changes, it was desirable to declare this income to make use of other deductions like home offices and equipment. With the new deduction on income.