There’s a lot of confusion and buzz around the new 20% deduction for small business owners. Who does it apply to? How does it work? When do you take it? There are many variables and conditional statements within this new law. Before we get too deep into it, let’s start by understanding how this new deduction applies to the most common business entity: Schedule C – Sole Proprietor.
Of the 26 million business in the United States, over 10 million are sole proprietors filing Schedule C. The amount of deduction you receive depends on what type of business you have, your business profits, and your taxable income. Let’s look at some examples to understand how this works.