The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) is transformative legislation that dramatically changes the tax landscape for individuals and businesses for years to come. It has an impact on the income tax that attorneys will pay and it also affects the work that firms will be asked to do.
Tax Impact on Attorneys’ Personal Returns
Most law firms are set up as limited liability partnerships (LLPs), where income, deductions, credits, etc. pass through from the firms to their partners. Partners pay income tax on these items on their personal returns. The Tax Cuts and Jobs Act (TCJA) created a new “qualified business deduction” for owners of pass-through entities. This 20 percent deduction is not a business deduction or an adjustment to gross income; it simply reduces taxable income.
