https://www.washingtonpost.com/business/...b23fb0e3aa

On Friday, lawmakers added a provision to the tax package, offering a 20 percent deduction for income earned from “pass-through” entities, companies that don’t pay corporate taxes but pass through the income to be taxed as part of the owner’s tax bill.

As I understand this provision it means Sub S corporations get a 20% deduction. This is done to "equalize" the tax rate for pass through entities with corporations whose rate is now down to 21%.

This isn't a deal killer, but its something I disagree with about the bill. It involves a misunderstanding of what pass through entities are. They are basically an individual's business. What they are doing is giving business owners a 20% break over salaried employees. That is the proper comparison, not a pass through vs. a corporation.

The corporation may have a lower rate, but the owners will pay taxes at the individual rates on dividends and capital gains. All in all, the corporations are still paying 21% more than the pass through companies.

It was a relatively quick fix that is likely "close" to a wash had they done it a different way.

But what you state is correct. I would have rather them granted a grace period to easily allow those companies to convert to a C corp in order to take advantage of the 21% corporate tax rate. After paying themselves a basic salary of $60K, they could then dividend any amount further than that to themselves.

It makes a lot of sense.