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 his/her 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. 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 pass-through entity deduction here (What is the pass-through entity deduction?).