Business Owners: Avert Obstacles To Tax Savings
Published Friday, January 18, 2019 at: 7:00 AM EST
The Tax Cuts and Jobs Act (TCJA) gives business owners new ways to save significantly on federal income taxes, but there are obstacles to getting the full benefits. Here's a primer on tactics to get around some of the barriers.
TCJA permits business owners to deduct 20% of the income passed to them through an S-Corp, LLC, sole proprietorship, and other business forms — excluding C-Corporations.
Section 199A of the tax code makes it harder to qualify for the 20% deduction for businesses that perform services, such as healthcare, law, accounting or consulting. For them, the deduction was phased out above $157,500 for an individual filer and $315,000 for a married couple in 2018, and that will be adjusted for inflation in 2019 (to $160,700 for a single, $321,400 for a couple). The deduction was entirely eliminated for a single-filer on taxable income of more than $207,500 in 2018 and for married taxpayers with more than $415,000 (rising to $210,700 and $421,400 for 2019). Earning more than that means you can't take any 199A deduction whatsoever.
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