US Treasury Issues Proposed Regulations on New 20% Deduction for Pass-Through Businesses

The 2017 tax cuts created a new 20% deduction for pass-through businesses, but exempted service-based businesses such as doctors, lawyers, and etc.

We have a product-based business, but our accountant was unsure earlier this year whether we would qualify, and was waiting for these regulations to come out.

Treasury just released them today, and they look promising for indie hackers!

From a tax expert: "If your total income is below $157,500 single/$315,000 married, there are no limits to the deduction. You get 20% of business income or taxable income, whichever is greater. Limits on industries and amount paid in wages only apply if your total income exceeds that."

After $157,500 single/$315,000 married, it gets complicated and consulting-type businesses are exempt. So (for example) if you built a CMS that you sell to customers, you would get the deduction after that point, but if you do custom WordPress installations, it would not.

This is a HUGE gift to small businesses, especially small tech companies like ours. I wouldn't be surprised if we saw more people striking out on their own after this.

Press release with links to the full rules: https://home.treasury.gov/news/press-releases/sm456

(Obligatory: consult your friendly neighborhood or virtual accountant.)