WWTBAM Bored

Here's another doozy from Donny's budget. He's wants to slice the top rate on pass-through income to 15%. Here's what that means. I'm a non-equity partner in my firm, so I'm paid salary plus a discretionary end-of-year bonus. That means I pay regular income tax on my income, which (under Donny's plan) could go as high as a 35% marginal rate.

The marginal tax rate for my equity partners, in contrast, would be capped at 15%. So not only do they make a lot more than I do (trust me, they do), and not only do they get to deduct all of their unreimbursed business expenses (for the rest of us, unreimbursed business expenses are "miscellaneous itemized deductions" which are not deductible at all until they exceed 2% of adjusted gross income), but they'll pay a tax rate that's 20% lower than mine. I can't wait to hear how his sycophants try to justify this.

By the way, I'm sure this is just a coincidence but most real estate partnerships, such as many of the entities in the Trump Organization, are structured as pass-through entities. So when we examine Donny's tax returns (the election's over so he's released them, right?), we'll see that this will give him a gigantic tax cut. --Bob

So, what's the difference between a non-equity partner and an associate (other than a fancier sounding title)?

silverscreenselect wrote:So, what's the difference between a non-equity partner and an associate (other than a fancier sounding title)?

I can run cases and I have at least apparent authority to speak for the firm. --Bob

Can you restructure yourself as an LLC? That way you'd receive the same preferred lower pass-through tax treatment.

bazodee wrote:Can you restructure yourself as an LLC? That way you'd receive the same preferred lower pass-through tax treatment.

Lawyers use professional corporations. I haven't looked into it. No reason to do so under current law, except maybe saving myself a bit of Medicare tax that I am in fact willing to pay. If we're talking about a 20% difference in tax rates, I may need to reconsider. --Bob

bazodee wrote:Can you restructure yourself as an LLC? That way you'd receive the same preferred lower pass-through tax treatment.

I don't think he can while keeping his current position.

I'm working through my LLC so have all sorts of tax advantages.

Bob78164 wrote:

bazodee wrote:Can you restructure yourself as an LLC? That way you'd receive the same preferred lower pass-through tax treatment.

Lawyers use professional corporations. I haven't looked into it. No reason to do so under current law, except maybe saving myself a bit of Medicare tax that I am in fact willing to pay. If we're talking about a 20% difference in tax rates, I may need to reconsider. --Bob

I've been seeing Legal LLCs popping up in New York State lately.

eyégor wrote:

Bob78164 wrote:

bazodee wrote:Can you restructure yourself as an LLC? That way you'd receive the same preferred lower pass-through tax treatment.

Lawyers use professional corporations. I haven't looked into it. No reason to do so under current law, except maybe saving myself a bit of Medicare tax that I am in fact willing to pay. If we're talking about a 20% difference in tax rates, I may need to reconsider. --Bob

I've been seeing Legal LLCs popping up in New York State lately.

California law started authorizing limited liability partnerships (LLPs) a little more than 20 years ago, and almost every major firm in the state (and most of the minor ones) switched pretty much immediately. But that was to address liability issues (every partner of a general partnership is legally liable for all partners' acts within the course and scope of the partnership), rather than tax issues. --Bob