Pass-Through Entities Tax Rate Reduced

The U.S. Treasury Department has announced rules for an income tax break applicable to pass-through entities, including partnerships, S corporations and limited liability companies.

Such businesses aren’t taxed, but all their income flows through to their owners for tax purposes regardless of whether it is distributed. So, the owners pay taxes on it.

The new rules reduce the top tax rate on such income from 36 percent to 29.6 percent, purportedly as part of a governmental effort to level their playing field with corporations, which saw a reduction of their top tax rate from 35 percent to 21 percent under the 2017 federal income tax overhaul.

Corporations, though, are subject to double taxation, in that they pay taxes on their income, and their owners pay tax on the same income when it is distributed to them.

Source: The Howe & Hutton Report