Episode #19: Pass-Through Deductions


The Principle:

Join us as we examine a tax-planning strategy that could save you money. Brian unpacks the idea of pass-through deductions.

(Click the featured times below to jump forward in the episode)

Honest Takes:

[00:16] – What Are Pass-Through Deductions? 

  • Pass-through deductions are often used by small business owners to maximize in tax savings. Many small business owners operate as an S-Corp. They might also be classified as an LLC while being taxed as an S-Corp. In these situations, a $40,000 loss of revenue passes through your business and shows up on your 1040 form when you go to file your taxes. This is where we get the term pass-through deduction.

[1:19] – Changes To Pass-Through Deductions. 

  • These days, changes in legislation have enabled business owners to take advantage of all sorts of tax savings strategies. Pass-through deductions have changed as well, and you need to work with your advisor to take advantage of new benefits.

[2:36] – Take Advantage Of The Tax Law.  

  • A business owner we work with wanted to sell his highly appreciated stock. His CPA told him to give it to a charity to alleviate his tax burden. If he gifted the highly appreciated stock to a charity the capital gains would be eliminated, and this would help pay his Virginia state income tax bill as well. In many cases, his federal income would be reduced as well. This small business owner also had children enrolled in a private Christian School. We encouraged him to take advantage of the tax credits that accompanied giving to organizations like this school. Basically, the law would allow him to donate to the school, and in turn, the state would give him 65 percent of the gift value of his donation as a state tax credit. The capital gains taxes on his investments would also be wiped away in that situation.

Today’s Truth:

Other Virtues:

The host: Brian Bowen – Contact

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