Inflation Reduction Act extends ‘pass-through’ tax break limits for 2 more years. Here’s what that means for entrepreneurs

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.