Posted on June 11, 2012 by

NC Dept. of Revenue issues Directive on $50k Business Income Deduction

North Carolina has a new law, G.S. 105-134.6(b)(22),  that grants business owners a deduction of up to $50,000 of their net business income from NC taxable income.  The income must be reported on Form 1040 Schedules C, E or F, and no deduction for passive income is allowed.  The North Carolina Department of Revenue just issued a Directive that answers FAQs on the new law.

Unfortunately folks like me who own small businesses that are incorporated cannot benefit from the deduction.  However, those who own 100% of a business and want the protection that a separate legal entity provides can establish a limited liability company (LLC).  A single member LLC is disregarded for tax purposes by the IRS, so the income is reported on the owner’s Schedule C.  At a tax rate of seven percent, the savings could equal $3,500 per year.

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