How Does the 20 Pass-Through Tax Deduction Work?
For 2019, the threshold is taxable income up to $321,400 if married filing jointly, or up to $160,700 if single. If your income is within this threshold, your pass-through deduction is equal to 20% of your qualified business income (QBI). This is the maximum possible pass-through deduction.
How does tax pass through work for a LLC?
LLCs are subject to pass-through taxation. By default, the IRS regards single-member LLCs as disregarded entities and multi-member LLCs as partnerships. LLC profits will pass through to its members to be reported on their personal tax returns.
When does the pass through tax deduction phase out?
If your taxable income is over $157,500/$315,000, the deduction is phased-out. You get no pass-through deduction at all if your taxable income exceeds $415,000 (married) or $207,500 (single).
