How the 20% deduction rule works
Specific Service Industries All other industries
(CPAs, attorneys, brokers, Drs, etc –
But not engineers nor architects)
___________________________________________
LESSER of: | LESSER of:
A. 20% of net business income A. 20% of net business income
B. 20% of taxable income B. 20% of taxable income
UNDER TAXABLE INCOME
****TAXABLE INCOME 157,500 single 315,000 Married ****
OVER TAXABLE INCOME
Then phase out of benefit over these levels
50,000 for single and 100,000 for Married
No 20% deduction over phase out LESSER of these 3 numbers:
A. 20% of net business inc.
B. 20% of taxable income
C. Which is Greater?
1. 25% of wages + 2.5 % X cost basis of assets
2. 50% of wages
No 20% deduction over phase out
Taxable income greater than:
Single 207,500
Married 365,000
