Senate Majority Leader Chuck Schumer, D-N.Y., discusses the Inflation Reduction Act on Aug. 7, 2022 in Washington, D.C.
Kent Nishimura | Los Angeles Times | Getty Images
Senate Democrats curtailed a tax break for certain pass-through businesses as part of the Inflation Reduction Act passed Sunday.
A pass-through or flow-through business is one that reports its income on the tax returns of its owners. That income is taxed at their individual income tax rates. Examples of pass-throughs include sole proprietorships, some limited liability companies, partnerships and S-corporations.
Democrats’ legislation — a package of health-care, tax and historic climate-related measures — limits the ability of pass-throughs to use big paper losses to write off costs like salaries and interest, according to tax experts.
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