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S Corporation Banks Facing New Regulations

On Wednesday, August 8, 2018, the Internal Revenue Service issued proposed regulations that would implement the new 20% qualified business income deduction for S corporation shareholders. This new deduction was created by the Tax Cuts and Jobs Act in 2017 as an attempt to level the playing field for certain pass-throughs such as S corporations with respect to the reduction in the federal corporate income tax rate from 35% to 21%.

The deduction is generally available to eligible S corporation shareholders whose taxable income is below $315,000 for joint filers and $157,500 for individual filers. However, deductions for shareholders above these thresholds may contain limitations. Wages, capital gains interest and dividend income are excluded from the calculation of qualified business income.

Comments on the proposed regulations must be received by the Internal Revenue Service within 45 days after the proposed rules are published in the Federal Register. Below is a link to the proposed regulations:

For additional information regarding these proposed rules, please contact Bruce E. Toppin, III at (210) 253-7102 or


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