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2019 199A Tax Deduction

10/19/2019

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If you operate your business as a pass-through entity, such as a proprietorship, partnership, or S corporation, the profits of that business can generate the Section 199A tax deduction.  Let's Tax Plan today.

No-Problem Businesses

You qualify for the Section 199A deduction—period, regardless of pass-through business type—when you have

• pass-through qualified business income (QBI), and
• 2019 Form 1040 taxable income equal to or less than $160,700 single (and head of household) or $321,400 married, filing jointly.

With Form 1040 taxable income equal to or less than the thresholds listed above, doctors, lawyers, accountants, financial planners, stockbrokers, manufacturers, retailers, consultants, and all other businesses with pass-through income qualify for the deduction.

There’s no out-of-favor specified service business problem with income below the thresholds. And the calculation is easy.

With taxable income equal to or less than the thresholds, you qualify for the Section 199A deduction. Your deduction will equal the lesser of:

• 20 percent of your Form 1040 taxable income less net capital gains and dividends, or
• 20 percent of your QBI.

Note that qualification for the deduction starts with your Form 1040 taxable income.

Example. You are married with joint taxable income of $320,000 and QBI of $350,000. Your Section 199A deduction is $64,000.

As you can see, no issues. If your taxable income is above the thresholds, you need to consider tax planning—now. Why now? Because some strategies require that you have time on your side.

For example, if you switch from a proprietorship to an S corporation to benefit from the W-2 wage strategy, your switch does not begin until you have the S corporation in place.

If you are looking at a retirement plan strategy, you want time to consider your options and get that tax-savings plan in place.
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    Important Disclosures


    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

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    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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    Author

    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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