Many businesses will benefit this year from the new 20 percent qualified business income deduction. This deduction applies to "pass-through entities:" partnerships, S-corporations, sole proprietorships, and most LLCs. However, if your taxable income from all sources exceeds $157,500 for an individual or $315,000 for a married couple filing jointly, your 20 percent deduction could be phased out. For these higher-income business owners, the deduction is limited to your share of your most advantageous calculation:

• 50 percent of the W-2 wages your company pays OR
• 2.5 percent of the purchase price of business fixed assets (with some limitations), plus 25 percent of W-2 wages paid.

The above assumes you are not a "Specified Service Trade or Business," but few construction-related companies are.

PRO TIP: If your company files a partnership return, beware the guaranteed income trap. Guaranteed income paid to the partners is not considered pass-through income eligible for the 20 percent deduction. Neither is the S-corp owner's W-2 pay, but at least that counts toward the 50 percent/25 percent W-2 wages in the above calculations, so it can help the owner qualify for the 20 percent deduction.

For more information, consult your CPA. There’s still time for last-minute tax strategies involving owner payroll, paying a spouse, or retroactive S-corp elections, among others.

Brooke Witt is a CPA at Duncan Witt CPA Group PLLC, a Bothell-based accounting firm specializing in tax advice for families and small businesses in Snohomish and King counties looking for someone to trust. For high-quality, comprehensive accounting and tax services, visit their website or reach out to them at 425.501.9000.

Event part of MBAKS’ ongoing engagement on HB 1110 & HB 1337 implementation

MBAKS recently hosted a Middle Housing Forum focusing on state law changes now being implemented that could transform the housing landscape in our region and state.

The March 25 learn-at-lunch style event drew nearly 100 attendees. It was designed to help MBAKS members navigate the coming changes related to middle housing and accessory dwelling units (ADUs) following the adoption of HB 1110 and HB 1337 in 2023.

Panelists included Lilith Vespier, Infill Housing Manager with the Department of Commerce; Adam Weinstein, Director of Planning & Building for the City of Kirkland; and Ryan Gillis, Founder and CEO of Gillis Real Estate. 

In case you missed it, members can find a copy of the presenters’ PowerPoint slides on our Middle Housing & ADU Resources page, which is part of the Resource Library on MBAKS Connect.

Following panel presentations, attendees also heard brief updates from a handful of other city representatives in attendance from Bellevue, Bothell, Kent, and Lynnwood. Many cities in our two counties are in the process of updating local codes to comply with the new middle housing and ADU state laws. Local jurisdictions have until June 30, 2025 to update their codes.

The forum ended with audience Q&A time. During this open discussion, some members reiterated a point Ryan Gillis made during his presentation--the importance of flexibility in local codes so that builders can better respond to market demand. Another member stressed the importance of ensuring floor area ratios and building heights are properly set so that more project types are feasible to build. 

Members also expressed concerns about affordable housing fees that some jurisdictions are adopting alongside middle housing codes, as they will create unnecessary barriers to adding more housing choices.

MBAKS Executive Director Jerry Hall closed by sharing MBAKS’ overarching suggestion for cities implementing middle housing and ADU changes – “keep it simple.” The easier and more cost-effective it is to build middle housing, the more likely it is to be built, and the more attainable it will be for those looking for a place to call home.

Thanks to all who attended the Middle Housing Forum! To keep up with our advocacy work and changes related to middle housing and ADUs, MBAKS members are encouraged to engage with our Builders Councils.

By MBAKS Senior Policy Analyst Allison Butcher

Data from the Northwest Multiple Listing Service show the month’s supply of housing inventory for sale continuing to decline in King and Snohomish counties. In November, King County had 0.93 months’ supply of inventory, down from 0.99 the previous month, and 1.39 months’ of inventory a year ago. Even more concerning, Snohomish County had just 0.38 months’ supply of inventory in November, down from 0.49 the prior month and 1.27 a year ago.

The Builder's Bulletin is intended to provide a convenient way to track housing in our market and includes information from the Northwest Multiple Listing Service, State of the Cities Data Systems, Office of Financial Management, and the Washington State Employment Security Department.

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