Business Owners May Get Tax Deduction

Melissa Clary Tax, Tax Savings Strategies 0 Comments

Many owners of sole proprietorships, partnership, trusts and S corporations could get to deduct up to 20 percent of their qualified business income.  The new tax deduction for owners is referred to as Section 199A deduction which was created by the Tax Cuts and Jobs Act that is effective starting the beginning of this year.
The tax deduction for owners is generally available to eligible taxpayers whose 2018 taxable income falls below $315,000 for joint returns and $157,500 for other taxpayers.  It’s generally equal to the lesser of 20 percent of your net profit.  Qualified real estate investment trust dividends and qualified publicly traded partnership income minus capital gains can qualify as well.
Qualified business income includes domestic income from a trade or business.  Employee wages, capital gain, interest and dividend income are excluded.
There are exceptions to this tax deduction. If your taxable income is over the threshold amounts or any business involved in the performance of services in fields of health, law, consulting, athletics, financial services, brokerage services or just any business where the principal asset is the reputation or skill of one or more of its employees or owners. To help understand who has limitations, if the success of the business depends on you and not something you sell you are included in this definition, except for architects and engineers.
The taxpayers who have limitations have a more complicated way to calculate their 199a qualified business deduction.  Taxable income, wages and business assets are factored into the calculation.

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