Can multiple trusts be used to maximize the pass-through deduction?
Abstract: The Tax Cuts and Jobs Act added Section 199A to the tax code, allowing owners of sole proprietorships and pass-through entities to deduct up to 20% of their qualified business income. Sec. 199A offers valuable tax benefits to business owners, but these benefits may be reduced or eliminated if an owner’s taxable income exceeds certain thresholds. One strategy to qualify for the full deduction is to transfer portions of the business to several trusts for the benefit of one’s heirs, each of whom has income below the applicable threshold. This article details how this strategy works.