New tax law 25% pass through rate

[Matas]

After reading this linked from PoF site:

https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/

 

Not sure how this will affect physicians who own their practice in regards to the new rate. Since the doc is an "active owner" it appears that the 25% "capital rate" rate will be capped at 30% of pass-through income. Will this cap be adjusted if the owner can demonstrate a higher capital investment? For example, is the income generated from ancillaries or the technical component of procedures eligible to be taxed at the lower 25% pass-through rate?

How would capital investment into the practice, such as a start-up loan or personal investment of cash be treated with regards to the lower "capital rate" vs the higher "labor rate"?

[Zaphod]

Matas wrote:

After reading this linked from PoF site:

https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/

 

Not sure how this will affect physicians who own their practice in regards to the new rate. Since the doc is an “active owner” it appears that the 25% “capital rate” rate will be capped at 30% of pass-through income. Will this cap be adjusted if the owner can demonstrate a higher capital investment? For example, is the income generated from ancillaries or the technical component of procedures eligible to be taxed at the lower 25% pass-through rate?

How would capital investment into the practice, such as a start-up loan or personal investment of cash be treated with regards to the lower “capital rate” vs the higher “labor rate”?

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Since its a professional firm the assumption starts at 0%, you then have to prove that its capital through a series of formulas and tests which is likely to be very onerous. Sorry, you and I are the ones footing this bill.

[ScientistPhysician]

https://www.wsj.com/articles/heirs-some-business-owners-are-winners-in-tax-plan-1509669182

 

Sorry bro, but these guys are specifically restricting docs from taking pass-through income. You are not the target constituent for this bill.

[Matas]

ScientistPhysician wrote:

https://www.wsj.com/articles/heirs-some-business-owners-are-winners-in-tax-plan-1509669182

 

Sorry bro, but these guys are specifically restricting docs from taking pass-through income. You are not the target constituent for this bill.

Click to expand...

Does the new tax proposal specifically exclude physicians by occupation, or are we just subject to the additional scrutiny of verifying income from capital contributions versus labor?

[Zaphod]

Matas wrote:

ScientistPhysician wrote:

https://www.wsj.com/articles/heirs-some-business-owners-are-winners-in-tax-plan-1509669182

 

Sorry bro, but these guys are specifically restricting docs from taking pass-through income. You are not the target constituent for this bill.

Click to expand…

Does the new tax proposal specifically exclude physicians by occupation, or are we just subject to the additional scrutiny of verifying income from capital contributions versus labor?

Click to expand...

Specifically excludes all professionals, lawyers, dentists, cpas, doctors, etc...and puts your non earned income at 0. You then are forced to prove some is not.