Hartford Business Journal

8 Hartford Business Journal • April 1, 2019 • www.HartfordBusiness.com FOCUS: Tax Law EXPERTS CORNER How to take advantage of the new 20% biz income deduction By Brenden Healy T he 2017 Tax Cut and Jobs Act created many new tax advan- tages for businesses. Among them is a 20 percent tax deduction available to owners of "pass- through" entities, including sole propri- etorships, partnerships, S corporations, trusts, estates or LLCs. If you have rental properties, this deduction might also apply. Also under the new tax law, tax- payers may be able to deduct 20 percent of their real estate investment trust (REIT) dividends and publicly traded partnership income as well. Because the income taxes of pass- through businesses are paid by the owner of that pass through, this new 20 percent deduction may allow a business owner to save a significant amount of money off their personal income tax bill. Keep in mind though, this 20 percent tax deduction does not apply to wage income of the business owner, nor does it apply to C corporation entities. Under the new tax law, C corps (or "regular" corporations) now have a relatively low income tax rate of 21 percent, which is much lower than the highest personal income tax rate of 37 percent. This 20 percent deduction was a way for Con- gress to give certain pass-through busi- ness owners a tax break, too. The 20 percent deduction is avail- able in tax years starting Jan. 1, 2018 and it expires eight years later in 2026. This means you can take ad- vantage of this tax deduction for the next eight years. In order to claim the deduc- tion, there are several hurdles that need to be cleared. As an owner of a pass- through entity, you first need to look at your income. If your combined income for the year is less than $315,000 (filing a joint tax return) or $157,000 (not filing a joint tax return), then you generally get to claim this 20 percent pass-through business deduction on your tax return. If your income is greater than those thresholds, you can still move on to considering other hurdles, but you might not qualify for the entire 20 percent deduction. The next hurdle is to see if your busi- ness is a "specified service business," or "SSB." SSBs are generally defined as professions in health, law, account- By Gary Larkin Special to the Hartford Business Journal C onnecticut businesses that offer student loan repayment assistance to employees could be eligible for a new tax credit under a bill being considered by state lawmakers. There have been a handful of proposals on the topic filed in the legislature this year, and one — Senate Bill 435 — recently passed out of the Higher Education and Employment Ad- vancement Committee. It would create a tax credit starting in Jan. 2020 that would be equal to 50 percent of the monthly student loan payment made by the employer on any eligible loan. Bill proponents agree there is a chance some kind of employer tax credit will be approved this session as the concept has bipar- tisan support. "I'm really opti- mistic about this," said state Sen. Will Haskell, a freshman Democrat from Westport. "And I think we can work out a bipartisan agreement." House Minor- ity Leader Themis Klarides (R-Derby) said she's heard a lot of concerns about student loan debt, with the average pupil ow- ing about $30,000 after they gradu- ate college. "By providing this tax credit, we're in a position to provide student loan repayment assistance and help replenish the aging workforce in Connecticut at the same time," she said. During his Feb. 20 budget address, Gov. Ned Lamont called for more companies to adopt student loan repay- ment benefits, arguing it could act as a recruitment tool for the state. He also pointed to major corpora- tions Travelers Cos. and Stanley Black & Decker as examples of companies preparing to offer such a benefit. For example, Travelers announced earlier this year that starting in Jan. 2020 Brenden Healy BY THE NUMBERS The U.S. student loan crisis $1.56T Total U.S. student loan debt. 44.7M Total U.S. residents with student loan debt. 11.5% Percentage of student loans that are 90 days or more past due or in default. $393 Average monthly student loan payment. Source: Student Loan Hero via U.S. Federal Reserve and Federal Reserve Bank of New York Sen. Will Haskell, (D) Westport Hartford-based Foley adopted a student loan repayment benefit three years ago. Now, 20 percent of the company's employees use it, including: (Front) Diamond Bates, Gary Santiago, Maria Spellman and (back) Alexander Lavruk and Grayson Yacovone. Debt Relief Bill offers CT companies a tax credit for student loan assistance programs PHOTO | CONTRIBUTED

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