Treasury finalizes rules for key component of tax reform for pass-through trades and businesses.

Key Points:

..The deduction of up to 20% of pass-through trade or business income effectively may reduce the top marginal federal income tax rate on such income from 37% to as low as 29.6%, excluding the effect of the 3.8% surtax on net investment income and the self-employment tax.

..The deduction is subject to numerous limitations, which may reduce the amount of the deduction or deny a taxpayer the deduction entirely.

..Taxpayers with trade or business activities conducted through multiple pass-through entities should carefully consider how they define the scope of their trades or businesses and whether aggregating eligible trades or businesses maximizes the amount of the deduction.