Law in the Marketplace: For some, an amendment to minimize 2020 taxes
Published: 3/13/2021 3:41:15 PM
As many readers who are business owners will know, section 199A of the Internal Revenue Code (the IRC) provides owners of “pass-through businesses” (i.e., sole proprietorship, S corporations and entities taxable as partnerships) with an annual federal income tax deduction of up to 20% of their share of the net income of their business. The importance of the section 199A deduction is huge; for many businesses, it can make the difference between business success and failure.
Furthermore, although section 199A is due to expire at the end of 2025, both the U.S. Senate and the House have just introduced bills that will make section 199A permanent. In my view, it is virtually certain that these bills will pass, since they will benefit at least 17 million business owners who are receiving section 199A deductions.
Law in the Marketplace: Inside the uncertain I&D Tax
Published: 2/13/2021 2:22:13 PM
Although New Hampshire boasts that, unlike most other states, it imposes no state income tax on its residents, it does impose an income tax on New Hampshire business owners, and it’s a significant one – namely, the New Hampshire Interest and Dividends Tax (the “I&D Tax”).
With exceptions I’ll explain below, this tax applies at a rate of 5% to interest and dividends received by New Hampshire residents from corporations, LLCs and other entities with “transferable shares” a term I’ll also explain below. There are currently about 55,000 New Hampshire residents who are the owners of single-member LLCs. The question I will address below is whether these individuals are subject to the I&D Tax. As you’ll see, the answer is painfully uncertain; but the path to certainty may also be painful.