How the New Pass-Through Limits Work in the Tax Plan
The House and Senate blended their provisions on a crucial piece of the new tax break for pass-through businesses that aren't in professional service industries.
The House version was based on a company’s capital investments, giving firms the ability to get more of their income at a 25% rate if they had more capital invested.
The Senate’s version limited the tax break to 50% of wages paid.
The final version combines the two approaches. Now, the 20% deduction is capped at either 50% of wages or 25% of wages plus 2.5% of capital assets, whichever is greater.
Compared to the Senate bill, that’s a benefit for capital-intensive companies that don’t pay a lot of wages or any wages at all.
These limits only apply for businesses whose owners have individual income exceeding $157,500 or joint filer income of $315,000.
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