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Tax Law Research : Federal and Ohio: Taxation of LLCs
The Internal Revenue Code does not provide a specific regime for LLC federal taxation. Instead the LLC must be taxed under one of the existing tax structures, namely as either a partnership or a corporation. Under the "Check-the-Box" Regulations LLCs are treated as pass-through entities, which means that the partners (or sole owner) just pay taxes on their individual tax return(s), unless an affirmative election to be taxed as a corporation or an S Corporation is filed with the IRS. The complexities of S Corporation taxation are beyond the scope of this guide. Please see a tax advisor for further information.
The tax reform law created new Section 199A of the Internal Revenue Code, which provides for a deduction of up to 20% of a pass-through entity's qualified business income. Qualified businesses don't include specified service trades.
The tax reform provision also excludes performing services as an employee from the definition of a qualified trade or business. However, if you're a specified service business but your income is less than $157,500 for single filers or $315,000 for joint filers, then you can still claim the 20% deduction. If your income is up to $50,000 higher for singles or $100,000 for joint filers, then a partial deduction is available.