For 2019 the contributions limit for employees and self employed to participate in retirement plans such as 401(k), 457, tsp and 403(b) has increased by an extra $500 to $19,000. Also, IRAs have increased to $6,000 per year which has also increased by $500. This basically equals an extra $500 tax liability saving if you make contributions at the limit.
For those whom are employed and self employed you can contribute to your employers retirement plan ( and you will want to do this to their percentage of match) and your self employment plan. You want to make sure that you are not exceeding the limit in your combined contributions.
For example if you get paid $150,000 per year as an employee and you put 10% of your earnings in your 401(k), then you can only contribute $4,000 from your self employed since your combined contribution can't exceed $19,000 per year!
Your gift from Lawmakers is the new safe harbor for section 199A rental properties. If you qualify you can take it, its there for you to. According to the trade or business rule, your rental property profits can create the deduction. And now, under an alternative rule, you can use the newly created IRS safe harbor to make your rentals qualify for the deduction.
When you meet the new safe-harbor rules, the IRS deems your rental a trade or business with net rental profits that are QBI for the Section 199A tax deduction. But you may not want to use the safe-harbor rules, because they contain some onerous provisions. Also, you may not qualify to use the safe harbor. No problem. You can simply use the second method and win your 199A tax deduction using the existing trade or business tax law rules.
The IRS has provided some clarity on net capital gains in its section 199A final regulations.
It is possible for Section 199A, the new tax code, may be able to provide your net capital gains with a 20% reduction of your taxable income. The IRS has issued final regulations on Section 199A, along with that clarity they have issued on the capital gains component.
Section 199A often referred to as QBI is a tax deduction that applies to your trade or business income from pass-through entities. If your taxable income is equal to or less than the threshold of $315,000 (married, filing jointly) or $157,500 (filing as single or head of household), you apply the 20 percent to the lesser of your:
For the Section 199A calculation, your net capital gains are
Code §179 Property Defined as new or used depreciable tangible §179 property that is purchased for use in the active conduct of a trade or business (Code §179 (d)(1)).
TCJA 2017 modified Code §179, where the deduction limitation has increased, qualified real property expensing has expanded, lodging facility property is now eligible and $25,00 limit on SUV's inflation has been adjusted.
We Now, have covered the actual law for Qualified Real Property Expenditure. Let's shed some light on it!
Rental Property QBI
If you own rental property as an individual or through a single-member LLC for which you did not elect corporate taxation, you report your rental activity on Schedule E of your Form 1040. If you can claim the property is a trade or business, your QBI begins with the net income from your Schedule E.
We can help you with your rental property QBI. Contact us at 262-358-8297 or schedule an appointment online.
You will benefit from § 199A tax and are eligible to take the deduction from your business’s W-2 wages that were paid to you and your employees if any of the following applies:
Wages are just one factor that will help you realize an § 199A deduction! Give us a call we can help realize your full deduction on your tax return. 262-348-8297
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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.
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.