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Tax Guy: This new tax break can make a big difference for small business owners

The IRS has issued eagerly-awaited regulations that provide details on the new deduction for up to 20% of qualified business income (QBI) from pass-through entities. The QBI deduction was a major piece of the Tax Cuts and Jobs Act. It’s available for tax years beginning in 2018-2025 to eligible individuals, estates, and trusts that own interests in pass-through entities.

For QBI deduction purposes, pass-through entities are defined as sole proprietorships, single-member (one owner) LLCs that are treated as sole proprietorships for tax purposes, partnerships, LLCs that are treated as partnerships for tax purposes, and S corporations.

While the QBI deduction is available to individuals, estates, and trusts, the proposed regulations refer to all three as “individuals.

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