199A Deductions For Your Business
As part of the Tax Cuts and Jobs Act (TCJA) passed in 2017, Sec. 199A allows owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of the income earned by a qualifying business. In contrast to C corporations where income is subject to double taxation, the income earned by a sole proprietorship, S corporation, or partnership is subject to only a single level of tax (generally). Qualifying owners of these businesses report their share of the business’s income directly on their tax return and pay the corresponding tax at ordinary rates which, under the TCJA are typically higher than the Corporate rate of 21%. Sec. 199A attempts to mitigate this difference.
Sec. 199A is simple in theory, but there are numerous pitfalls that need to be explored and strategies determined to ensure you are a qualified business. For example, how you treat fiscal-year businesses and net income and losses, or the definition of a specified service business factors in. There also may be a reduced threshold for a substantial-understatement penalty that comes with claiming a deduction under this provision. Having an experienced and specialized tax advisor helps you navigate this complex process.
In contrast to C corporations where income is subject to double taxation, the income earned by a sole proprietorship, S corporation, or partnership is subject to only a single level of tax (generally). Qualifying owners of these businesses report their share of the business’s income directly on their tax return and pay the corresponding tax at ordinary rates. Sec. 199A provides a real benefit to owners of sole proprietorships, S corporations, and partnerships. Talking with our specialists can help you potentially unlock this benefit within your current structure or we can advise a better path forward for your future business needs.
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The Lurie Difference: A Streamlined Process
Lurie’s Specialty Tax Services advisors offer unique tax savings and reduction strategies for businesses and their tax concerns. The team works closely with you and your service partners to provide counsel and execution on matters that extend far beyond compliance. This close collaboration provides not only coordinated, seamless service with specialists who have deep expertise, but also delivers true dollar cost savings. Here is what to expect:
We Examine Your Indicators
Pass-through business, variable labor costs, potential for more than one QBI
We Help You Uncover Benefits
Enhance 20% federal QBI deduction using great flexibility of allocation methods
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