CAI-NJ Dec. 2018 (w)

ered an “electing real property trade or business.” Another unfavorable change deals with the new limitation on the use of net operating losses. Losses incurred in tax years after 2017 will only be able to offset up to 80% of tax- able income in a carryforward year. Additionally, there are no longer any carryback provisions; however, the carryforward period is now indefinite (instead of 20 years). For losses that were incurred before 2018, the rules remain unchanged, and there is no limitation on the amount of income that can be offset, even if it is carried forward to a post-2017 tax year. Probably the most significant and most complex provision under the law is the new Qualified Business Income Deduction (also referred to as the 20% Pass-Through Deduction). This provision, available to non-corporate taxpayers, provides for a deduction of up to 20% of qualified business income. Taxpayers with income from S-corporations, partnerships, LLCs, or even sole proprietorships may be enti- tled to this deduction provided they are not in a service business (i.e., health, law, accounting, consulting, etc.). Several hurdles must be passed to claim the full 20% deduction; however, taxpayers whose taxable income does not exceed $315,000, if married, will not be subject to these limitations (even if they are in a service business). We are still awaiting the issuance of many regulations further explaining and clarifying the application of these new rules. It is highly advisable to consult with your tax advisor to under- stand the implications of these chang- es to your business or your situation. n

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