Infographic: What Does the 20 Percent Pass-Through Rate Mean for Your Small Business?

Date: September 04, 2018

One of the biggest wins that came from the Tax Cuts and Jobs Act was the 20 percent deduction applied on pass-through entities.

Since the passage of the Tax Cuts and Jobs Act in December 2017, small business owners are taking steps to grow their companies and create jobs. The law includes many provisions—that NFIB advocated for—that help small business.

Perhaps one of the most notable provisions is the creation of section 199A, which allows for a 20 percent deduction for small businesses that are organized as pass-throughs. According to NFIB’s Small Business Introduction to the Tax Cuts and Jobs: Part I survey, 55 percent of small business owners say that the deduction is “very important” with another 29 percent say it is “somewhat important.”

The 20 percent deduction will be applied to pass-through entities such as S corporations, partnerships, or sole proprietorships — businesses that are not organized as C corporations. 

Although the 20 percent deduction is a significant benefit to small business, it is currently only in place until the end of 2025.  NFIB has long advocated for meaningful tax reform for small business, and we’re working hard to make the 20 percent deduction and other provisions in the Tax Cuts and Jobs Act permanent. Learn more about our efforts here.

Read our infographic below to find out what the 20 percent deduction means for small business.

Click here to see a full-size infographic.

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