There’s much in the new law for financial advisors to parse and explain to their clients, including a provision that makes the 2017 tax cuts permanent, an increased deduction cap for state and local taxes, and numerous business-friendly rule changes.
“The bill permanently sets the corporate tax rate to 21%. The tax rate on income from flow-through businesses, like those that are operated as an S corporation or a partnership or an LLC, can be as high as 32% to 40%. So there’s a differential of as much as 19 percentage points there. If you’re a savvy business owner who can shift income from an S corporation or an LLC to a C corporation, you’re going to have a huge amount of money to invest back into the business.”
