This tool is designed to estimate the potential deduction available under Section 199A of the Internal Revenue Code. It functions by taking relevant financial data, such as income and expenses from pass-through entities, and applying formulas established by tax law to determine the deductible amount. For example, a small business owner with $200,000 in net earnings from a sole proprietorship and no other complicating factors can use this resource to quickly ascertain the potential deduction to taxable income.
Its value lies in simplifying a complex calculation that can significantly reduce an individual’s or entity’s tax liability. The potential for tax savings encourages business owners to accurately track and report their financial data. The introduction of Section 199A and this type of aid offered a degree of parity between pass-through entities and C corporations following the 2017 Tax Cuts and Jobs Act.
