New Tax Laws for Business

New Tax Laws That Will Benefit Business Owners

There are many different aspects of the new tax laws that benefit business owners. The major change in the new tax rule is the qualified business income (QBI) deduction.

The QBI deduction was implemented in 2018. With this new rule, there is a potential 20 percent deduction from taxable income based on business income, but it has income limitations. The QBI deductions are used in pass-through entities, such as S corporations, LLCs, sole proprietorships, and partnerships, where the tax is imposed on the personal tax return of the owner and not on the business. In other words, the income “passes through” the business and falls on the individual tax return as a deduction and reduces taxable income.

One of the potential problems facing some gig workers is the hobby loss rule (Internal Revenue Code Section 183). This is triggered when expenses from an activity exceed the income from the activity, and the rule requires all income to be reported but only allows a deduction for expenses to the extent of income. The deduction for these expenses is a miscellaneous itemized deduction subject to the 2 percent-of-adjusted-gross-income. This means that for 2018 through 2025, because of the suspension of this deduction, there is no write-off for any expenses related to a hobby activity. Thus, gig workers must be prepared to show that they are engaging in an activity with a reasonable intention of making a profit, and not for personal pleasure or recreation.

Get In Touch

At RMH Tax & Financial Advisors, Inc., we've been serving the needs of Plymouth, MN and the surrounding areas for years. If you need help managing any aspect of your home or business's finances, we want to hear from you.

Please fill out this form and let us know how we can be of service. We will happily offer you a FREE initial consultation to determine how we can best serve you.

Thank you for visiting. We look forward to working together!

RMH Tax & Financial Advisors, Inc.

12805 Highway 55, Suite 412,
Plymouth, MN 55441
T: (763) 557-2818


Facebook  LinkedIn  Twitter 

© 2021

Search  Site Map  Privacy Policy  Disclaimer
Back to top

Get In Touch

Client Portal Login

Subscribe to our Newsletter