Impact of TCJA on Business Entities

The Tax Cut and Jobs Act permanently lowered the tax rate on C corporations to 21%. Owners of pass-through entities got a temporary parity measure—the 20% qualified business income deduction—which is set to expire at the end of 2025. According to the Tax Foundation, the cut in the corporate tax rate did not result in more C corporations being formed. In fact, there’ve been more pass-throughs. The “decline in both the number of C corporation returns and the C corporation share of business returns suggests that TCJA did not result in a massive conversion to the C corporation form (as predicted by other researchers at the time) and largely preserved the general tax advantage of the pass-through form.” #IdeaoftheDay