Confusion as to whether (or how) the House bill’s repeal of the deduction for state and local income taxes would apply to state and local income taxes imposed on an individual’s share of the income received from a pass-through business has been resolved in a letter issued by House Ways and Means Committee Chairman Kevin Brady (R-TX) this morning. Read the full letter here.
The Ways and Means section-by-section summary and the JCT summary released on Saturday both indicate that the deduction is intended to be preserved for state and local income taxes paid or accrued in carrying on a trade or business or producing income. The text of the bill, however appears to contradict this conclusion.
Congressman Brady’s letter confirms that the JCT’s summary (and, implicitly, the Ways and Means section-by-section summary) is incorrect in this regard; as the bill is currently drafted, state and local income taxes paid by an individual owner of a pass-through business would not be deductible on the individual’s tax return.