of TCJA Brings
BY JOHN SAVIGNANO, CPA
Clients are clamoring for information on becoming
passthrough entities, thanks to a provision in the Tax Cuts
and Jobs Act that allows for a 20 percent deduction on
qualied business income received through a small-business
entity such as an LLC or an S corporation.
If clients haven’t already led to become pass-through
entities, they’ve been asking whether they should do
so-and if they can qualify for the deduction. While on its
face, the provision might seem simple, there are actually a
lot of underlying complexities that make answering these
questions a little tricky, at least not without further IRS
For example, not every passthrough entity can qualify
for the deduction-excluded are rms engaging in what the
bill calls a “specied service trade or business.” is
includes the elds of accounting, law, actuarial science,
performing arts, consulting, athletics, nancial services,
brokerage services, or any trade or business where the
principal asset is the reputation or skill of at least one of its
It’s not always obvious whether a particular pass-through
counts as a service business. And what if some-one
owns more than one kind of business?
en there’s the matter of whether people are using their
reputations to drive business. If they are, they probably
won’t qualify for the 20 percent deduction.
Obviously, we’re thinking about who within the rm
might benet from the passthrough deduction. It could
vary among partner groupsmore senior vs. less senior
partners. Doing your own tax planning in terms of what
would be the best model.
For those clients that set up a pass-through entity in
order to take advantage of the deduction, the question
becomes, “What type of entity is best? An S corporation?
We don’t have regulations yet; we still need to nd out a
little bit more about this. Don’t quickly rush into
anything-wait and nd out a little more.
It’s very important to get the whole playing eld in front
of you before just saying, “Wow 20 percent; I’m going to
change my entity.
John Savignano is a partner with Savignano Accountants
& Advisors located at 47-46 Vernon Blvd., Second Floor, in
Long Island City. If you have any questions or require
additional information, please call John at 718-707-0955.