A Pass-Through Entity is any business where the income earned goes directly from the business to the owner of the business who reports it on their personal income tax return.
If your business is a sole proprietorship, LLC, partnership, or S-Corp, you have a pass-through business. Examples of pass-through entities include Uber and Lyft drivers, doctors in private practice, musicians, athletes, consultants, lawyers, accountants, and home-based business owners.
Under the Tax Cuts and Jobs Act, pass-through entities can deduct up to 20% of pass-through income on their federal income tax return using what is known as the Qualified Business Income Deduction (QBID). The actual amount you may deduct is subject to certain limitations and thresholds, depending on the nature of your business and your total income. Learn more about the QBID here: What is the Qualified Business Income Deduction?