Congress passed the largest tax overhaul in recent years, and with it, may have further fueled a fast-growing trend in the labor market – the rise in independent contractors. The tax bill includes provisions pertaining to the treatment of independent contractors that could make owning their own business as an IT consultant much more attractive.
According to the new law, independent contractors who file their returns on a pass-through basis or as a sole proprietorship and make less than $157,500 individually or $315,000 jointly, qualify for a 20% tax deduction on qualified business income. Under some circumstances (with the exact contours of these rules still being determined), independent contractors who earn more than these amount can also be eligible for the deduction.
Previous iterations of the bill excluded many of the benefits that incentivize people to become independent contractors. For example, earlier iterations of the bill would have prohibited independent contractors from deducting health insurance premiums from their overall taxable income. In the final bill, the deductibility of health insurance premiums was preserved.
Source: TechServe Alliance
