Source: HR1 Tax Cuts and Jobs Act (TCJA)

As it stands on January 30, 2018, a sole proprietorship, LLC or partnership with no wages would be precluded from any pass-through deduction under the TCJA.

However, Parker Tax Publishing, a major tax analysis service, points out:

“Caution: There’s no indication that the sharply divergent tax results discussed above were intended by Congress. By enacting Code Sec. 199A, Congress clearly chose to favor business owners over employees on the theory that doing so would promote job creation. But did it also intend to favor S corporation shareholders over partners and sole proprietors? Probably not. So, there’s a pretty good chance that the provisions for determining W-2 wages will eventually be changed (or interpreted by the IRS) in a way that puts the different types of entities on more equal footing.”

NO GUARANTEE, but we’ll all have to watch carefully to see how the IRS interprets the new law through regulations.  Stay tuned!