Income Reduction Under the Job and Cuts Tax Act
Hey, everybody, it’s Eric Pierre, your favorite CPA. With the 2018 year coming to an end, some of you may get a nice gift from Uncle Sam. Under the Tax, Job and Cuts Act, or what we know as the Trump tax law, there was a little provision known as QBI, or qualified business income reduction.
Those of you that are in business, some of you all are in a service industry that qualifies for this, such a real estate. What this means is that, for instance, if you make $100,000 and you qualify for all 20%, your taxable income drops down from $100,000 to $80,000. So, if you’re a sole proprietor or you are taxed as an entity that is subject to self-employment tax, you’ll still be subject to self-employment tax. What, you thought Uncle Sam was gonna give away the farm for you? However, if you do have proper tax planning and you are able to avoid that, not only will you be able to save on the self-employment tax, your savings now has just increased by that much more.
If you’re not sure if you’re in a qualified service industry or not, please give my team and I a call, as we are more than happy to help you understand your situation because, ultimately, we’re here to help you keep more money in your pocket and less in Uncle Sam’s. Have a great day.