Does any one know the details of pass through taxation in the senate bill ? How does it apply to S corp for physicians?
We're f'd.Does any one know the details of pass through taxation in the senate bill ? How does it apply to S corp for physicians?
Basically income from 528k-650k would be taxed at marginal rates of 60-70%, clearly to discourage SCorp usage among doctors, laywers, etc making around these amounts or slightly higher. If you're making millions through your S-Corp, that temporary blip at that bracket doesn't matter as much.Im confused by parts of that article. How are doctors salary tax suddently jumping to 70% and then coming down after ~650k? Where is the extra 30% coming from??
"because the deduction continues to apply even as its benefit is phased out." what??
I think the senate bill could be potentially great if you can hit that sweet spot of $500000 of taxable income if you’re married. It’s potentially a $115000 deduction assuming g you pay yourself a w2 of $230000. Please correct me if I’m wrong.
What about this not so hypothetical situation:
What if one-half of the couple is a 1099 with a salary that falls into that gap and the other is a W2 employee employed OUTSIDE the LLC. How does that affect this? I assume the 70% tax rate is being applied the corporation only and the the W2 would file separately?
I think the senate bill could be potentially great if you can hit that sweet spot of $500000 of taxable income if you’re married. It’s potentially a $115000 deduction assuming g you pay yourself a w2 of $230000. Please correct me if I’m wrong.
The way I understand it is that you'll get a 23% deduction only on the pass-through income not on the W-2 salary you draw monthly.
So its 250 for singles? how mnay anesthesiologists in corp make 250k or less?
The way I understand it is that you'll get a 23% deduction only on the pass-through income not on the W-2 salary you draw monthly.
The way I understand it is that you'll get a 23% deduction only on the pass-through income not on the W-2 salary you draw monthly.
So in my example:
ttl pass through is 40K x 4 = 160K
160K x .23 = 37K.
Deduct 37K and now your taxable income is 353K (390K-37K)?
I don’t understand the 23% deduction stuff....
Let’s assume 1099 income of $500k.
Minus salary $160k.
Minus business expenses (malpractice, health insurance, CME, etc) $30k.
Minus IRA contribution $40k.
What’s the tax rate now?
What’s the tax savings with the Senate plan?
How can a sham marriage help given 250k vs 500k limits?
SepWait...how are you contributing 40K to an IRA??
Yes, you get the concept. In effect, that $37K is tax free in terms of Federal Income tax plus it may keep you in a lower tax bracket overall (depending on your total income).
In effect, you save $13K in taxes each year due to the Trump tax code. Your "take home pay" just went up $13K which should help offset any negatives due to the loss of deductions.
in reference to TEEVA question and example above....
500K ttl income (160 salary + 340 pass through)
340 (pass through income) x 23% (pass through deduction) = 78K
500K - 78K - 30K (business expenses still deductible?) - 40K - 24K (standard married deduction)= 328K taxable income
by applying senate tax plan calculator with 328K taxable income I got:
$77,100 in taxes
That's 15% (77K/500K), I must have done something wrong.
Apply 23% pass through deduction to entire amount of passthrough income? or income after business deductions?
Are business deductions still allowed?
I'm assuming you plug in the ttl of the taxable salary and the pass through into the income tax brackets.
Minus business expenses (malpractice, health insurance, CME, etc) $30k.
Minus IRA contribution $40k.
Does any one know the details of pass through taxation in the senate bill ? How does it apply to S corp for physicians?
The new tax code is extremely complicated but I think most Anesthesiologists won't be hurt that badly by it. Sure, a select few will get hosed by the new code but the majority seem to benefit from it:
"explaining all the details of the Senate Finance Committee’s pass-through provisions would require a team of lawyers, but one feature is worth highlighting: The new deduction would be limited for “specified service businesses” like doctors, lawyers, and accountants, and for businesses without sufficient wage expenses paid to employees. But those limits would not apply to taxpayers with taxable income below $250,000 ($500,000 for joint filers). And the benefit of the deduction phases-out rapidly, over an income range of just $50,000 ($100,000 for joint filers).
That means that individual taxpayers with pass-through income subject to the phase-out could face very high marginal tax rates for reporting additional income. How high?
Consider the example of a married couple whose entire income is “specified service” income generated by a pass-through entity and who claims the standard deduction. At an income of $524,000, the couple could take an $87,000 deduction (17.4 percent of the couple’s taxable income “without regard” to the deduction) that would reduce their taxes by $30,450 (since they are in the 35 percent tax bracket), but the deduction is entirely phased out at an income of $624,000. On average, that amounts to more than a 30% surtax on top of the 35% statutory tax rate over that range of income.
The actual phase-out is much more complicated, as the bill’s text released Monday night makes clear, because the deduction continues to apply even as its benefit is phased out. (If that sounds convoluted, it’s because it is.) The couple’s marginal income tax rate would jump to 61.375 percent at $528,541 of income. And it would rise to 73 percent until their income reaches $624,000 and the deduction is fully phased-out, at which point their marginal tax rate would return to the 35 percent ordinary income tax rate. (Note that these calculations do not include the additional 3.8 percent in self-employment payroll tax or the net investment income tax)."
Anyone paying themselves $160K salary and $340K as S corp dividends is begging for an audit. The salary is way too low and should be in the $250k-$300k range with the rest as dividends.
Business costs like malpractice, SEP, expenses come out before you get the pass through money.
You can set up a 401K with the "employee" contributing $18K and the "company" paying the rest.
The benefit doesn't apply to lawyers or physicians. Only small business owners with an LLC.
The benefit doesn't apply to lawyers or physicians. Only small business owners with an LLC.
CNBC - "The difference is that the House bill places restrictions on which businesses can qualify for that rate — and lawyers and accountants wouldn't be able to qualify. In the Senate bill, those lawyers and accountants are prohibited from taking that 23 percent deduction unless their taxable incomes are below $250,000 if single, or below $500,000 for married couples."
So its 250 for singles? how mnay anesthesiologists in corp make 250k or less?
Anyone paying themselves $160K salary and $340K as S corp dividends is begging for an audit. The salary is way too low and should be in the $250k-$300k range with the rest as dividends.
Business costs like malpractice, SEP, expenses come out before you get the pass through money.
You can set up a 401K with the "employee" contributing $18K and the "company" paying the rest.
in reference to TEEVA question and example above....
500K ttl income (160 salary + 340 pass through)
340 (pass through income) x 23% (pass through deduction) = 78K
500K - 78K - 30K (business expenses still deductible?) - 40K - 24K (standard married deduction)= 328K taxable income
by applying senate tax plan calculator with 328K taxable income I got:
$77,100 in taxes
That's 15% (77K/500K), I must have done something wrong.
Apply 23% pass through deduction to entire amount of passthrough income? or income after business deductions?
Are business deductions still allowed?
I'm assuming you plug in the ttl of the taxable salary and the pass through into the income tax brackets.
Again, as I undertand it, the pass through income is income after all corporate deductions have been made. In your case, your pass through income should be:
340K minus all deductions= whatever that number is. I wouldn't count your 160K salary as pass through income. Only the remainder of the 340K minus whatever you write off.
Doctors wont qualify either.
Trump's plan will increase taxes on docs in high taxed states due to removal of the state income tax deduction while docs/lawyers/accountants won't benefit from any LLC going forward.
Pretty much screwed on this if you live in Cali, NY, Illnois, etc.
Big business is a big winner of GOP small business tax plan
"The House plan would lower the maximum pass-through rate to 25 percent, but a host of small and medium businesses — including service providers such as doctors, lawyers, dentists, architects and accountants — would be blocked from obtaining any benefit."
Doctors wont qualify either.
Trump's plan will increase taxes on docs in high taxed states due to removal of the state income tax deduction while docs/lawyers/accountants won't benefit from any LLC going forward.
Pretty much screwed on this if you live in Cali, NY, Illnois, etc.
Big business is a big winner of GOP small business tax plan
"The House plan would lower the maximum pass-through rate to 25 percent, but a host of small and medium businesses — including service providers such as doctors, lawyers, dentists, architects and accountants — would be blocked from obtaining any benefit."
Don’t worry, it’s just hypothetical. Trying to understand how to run the numbers, and how marrying a low earning spouse or adding the spouse to the company as an employee can provide significant tax savings. Not that I recommend anyone get married for tax savings, but the married vs single deductions and limits seem to stack heavily against single.Anyone paying themselves $160K salary and $340K as S corp dividends is begging for an audit. The salary is way too low and should be in the $250k-$300k range with the rest as dividends.
Don’t worry, it’s just hypothetical. Trying to understand how to run the numbers, and how marrying a low earning spouse or adding the spouse to the company as an employee can provide significant tax savings. Not that I recommend anyone get married for tax savings, but the married vs single deductions and limits seem to stack heavily against single.
Exactly my motive. Just an exercise to learn how the world works since I'm new to this stuff
I think you might be wrong:
CNBC - "The difference is that the House bill places restrictions on which businesses can qualify for that rate — and lawyers and accountants wouldn't be able to qualify. In the Senate bill, those lawyers and accountants are prohibited from taking that 23 percent deduction unless their taxable incomes are below $250,000 if single, or below $500,000 for married couples."
In the house bill docs don't qualify. However, it seems the senate bill does not exclude certain professions as long as income is low enough.