Owners of Pass Through Entities like S Corps, Partnerships, or Sole Proprietorships might be paying even less in taxes than before if the current tax bill passes. Most media outlets aren’t discussing this change that would make a big difference in the lives of many entrepreneurs.
The One Big Beautiful Bill increases the Qualified Business Income Deduction from 20% to 23%. The additional 3% would effectively increase the deduction by 15%.
That’s not nothing. It means that if you qualified under the limitations with a $100 K-1, instead of paying Federal and State Income Taxes on $80K, you’d only pay taxes on $77K.
The bill in its current form would make the QBI Deduction permanent and would also make additional changes to the income phase outs of the deduction. In many instances, the additional 3% deduction would offset the tax savings from losing the Pass Through Entity Tax Credit.
We’ll see what the Senate passes. I’ll keep you updated.
Let me leave you with this…
This week brought substantial news on the tariffs front. The yo-yo effect of the news has many confused, so I thought that I’d separate fact from fiction.
1 – A federal trade court on Wednesday ruled that the President didn’t have the authority to impose sweeping tariffs on virtually every nation. In doing so, it voided all of the levies.
2 – The next day, a federal appeals court temporarily put the ruling on hold that voided the tariffs while it considered the administration’s challenge to the lower-court decision. The order known as an administrative stay, didn’t rule on the merits of the litigation and are common in emergency appeals.
3 – It should be noted that these legal maneuvers only affected the blanket tariffs placed against individual nations.
4 – The tariffs placed on individual goods such as raw materials or energy are still in place given the authority granted by Congress to the President and were never in jeopardy of being voided.
The Wall Street Journal is reporting that the White House is now formulating a secondary strategy if their current legal challenges fail in the upper courts. That strategy includes…
1 – A stopgap effort to impose tariffs on swaths of the global economy under a never-before-used provision of the Trade Act of 1974, which includes language allowing for tariffs of up to 15% for 150 days to address trade imbalances with other nations.
2 – This would then allow the White House to devise individualized tariffs for each major trading partner under a different provision of the same law which was granted to counter unfair foreign trade practices.
Here’s my point.
I’ve had several conversations with economists and market leaders who were of the opinion that the New Administration would ultimately abandon the entire tariff movement given its unpopularity. Many said that in the end they’d say that tried it, the people hated it, and that the administration would then back away.
If that was the White House’s intention then when the lower court negated the tariffs, they could have just said something like, “Of well, C’est la vie,” and swept the whole thing under the rug while doing the old Potomac Two-Step. But that isn’t what they’re doing.
They’re fighting to keep the tariffs in place and even coming up with alternative plans if they lose the current legal wrangling.
My point is that tariffs, in one form or another, are here to stay. Since they’re now a fact of life, Entrepreneurs need to plan accordingly.
I’ve written extensively about maintaining your margins and pricing issues. Whether you like it or not this is our new reality, and we must all manage our businesses accordingly.
Get to it.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.SalarySolutions.net
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.