2019 Year-End Tax Guide

THE MARCUM 2019 YEAR-END TAX GUIDE | www.marcumllp.com

XI.) SECTION 199A DEDUCTION FOR SOLE PROPRIETORSHIPS AND OWNERS OF PASS- THROUGH ENTITIES The TCJA introduces Section 199A (Qualified Business Income Deduction, or QBI), which provides a deduction for sole proprietorships and owners of pass-

through entities (partnerships, S Corporations, trusts and estates, etc.). It is intended to provide tax relief to businesses not benefiting from the reduced top corporate rate, lowered from 35% to 21%. The 199A deduction is generally equal to 20% of QBI when taxable income is lower than the applicable threshold. The taxable income thresholds for 2019 are $321,400 for married filing joint; $160,725 for Married Filing Separate; and $170,600 for all others. The deduction is complex and subject to various rules and limitations based on (1) your taxable income, (2) type of business(es) you operate (i.e., Specified Service Trade or Business), and (3) your business’ W-2 wages and property. Planning Opportunities: n Consider making deductible retirement and HSA contributions, deferring income, or accelerating expenses to reduce taxable income. n Consider increasing your company’s W-2 wages by increasing year-end bonuses or converting independent contractors to employees. n Consider acquiring qualified business property before year-end. aggregating certain qualified businesses to maximize your 199A deduction. Analyze your various business revenue streams and consult with your tax advisor in determining which aggregated activities are more beneficial. For a more detail analysis of these deductions and concepts, we strongly advise you to consult with your tax advisor. n If you have multiple qualified businesses, consider

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