Business Owners: Avert Obstacles To Tax Savings

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.

To Read the Full Story, Subscribe or
This article was written by a professional financial journalist for Meg Green & Associates. and is not intended as legal or investment advice.

© 2020 Advisor Products Inc. All Rights Reserved.