The Tax Cuts and Jobs Act (TCJA) has included a recent change to tax deductions for owners of pass-through entities – a 20% deduction of qualified business income (QBI) from a qualified trade or business.

This most recent provision could potentially lower the maximum individual tax rate of 37% on pass-through income to 29.8%—which makes the tax rate comparable to the new C corporation tax rate of 21%. However, it’s important to note that this new law contains limitations that may lessen or even eliminate the deduction for some business owners.

Download our flowchart to better understand QBI deductions as a result of the Tax Cuts and Jobs Act (TCJA):

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