Article Date:
November 2020

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2020 Last-Minute Section 199A Tax Reduction Strategies

With all that’s happened in 2020, it’s easy to forget about your Section 199A deduction.


You may remember that the Tax Cuts and Jobs Act (TCJA) gave many pass-through businesses the Section 199A deduction as a no-effort, do-nothing 20 percent tax deduction based on defined business income.


For example, with defined qualified business income of $100,000 and defined taxable income of $100,000, you qualify for a $20,000 Section 199A deduction that you claim on your Form 1040.


One thing to be aware of is that tax planning that reduces your business income can also reduce your Section 199A deduction. For example, you buy $40,000 of equipment and expense it. Now, your qualified business income is $60,000 ($100,000 - $40,000) and your 199A deduction is $12,000 ($60,000 x 20 percent).


Your planning for the Section 199A deduction requires more attention if your qualified business income is more than $163,300 (or $326,600 on a joint return).


In this article, we bring you three Section 199A strategies you can implement before December 31, 2020, that can help you obtain your best deduction. ... Log in to view full article.

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