Different clients can adapt the possible change with different strategies.
“Many of our clients are the grantors or beneficiaries of trusts that own pass-through entities and would no longer qualify for the QBI deduction if this bill were to become law,” Dietz added. “One possible remedy is for the client to own the pass-through entity directly, instead of in trust. [But] for many of our clients, continuing to own passthrough entities in trust is the right advice despite the losing the QBI deduction.”
“Decisions about a business need to be business decisions with the tax consequences being a secondary concern,” Gibson said. “I don’t think there’s much that can be done to prepare for Wyden’s proposal. It’s capricious and arbitrary, a number which he pulled out of the ether, just like the original SSTB limitations.”
The current QBI deduction is scheduled to sunset in 2025. This proposal has a long way to go before becoming law.
“If you’re currently taking a significant QBI deduction, start thinking about how to manage your tax planning if a limitation becomes permanent after 2025. This may mean planning on paying more taxes at that point or rethinking your current choice of business entity,” he said.