The new Section 199A deduction gives owners of pass-through business entities (e.g. sole proprietors, partners in partnerships, some real estate investors, and S Corporation shareholders) an extra deduction equal to 20% of their “qualified business income.”
“Qualified business income” is your bottom-line business profit adjusted for deductions directly connected to the business, including self-employment taxes, self-employed health insurance and employer retirement plan contributions.
The Section 199A deduction cannot exceed 20% of your taxable income. And there is a potential limitation for single taxpayers with $157,500 of taxable income or married taxpayers with taxable incomes over $315,000.
Most professionals with the above taxable incomes will phase out of the Section 199A deduction. Professionals include doctors, lawyers, accountants, investment professional, athletes, performers and any one-person celebrity businesses.
While Section 199A is not easy to compute, it is a great opportunity for many of our business owners.
Our informed professionals at KRD can guide you through the complexities of this Section 199A. We can look at your business structure and determine if changes can be suggested to maximize the benefits of Section 199A. Contact us today to learn more.