Article Date:
November 2023

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2023 Last-Minute Section 199A Tax Reduction Strategies

With all that happened in 2023, it’s easy to forget 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 (QBI) 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. You didn’t have to do anything to get this deduction.


One thing to be aware of: tax planning that reduces your business income can also reduce your Section 199A deduction. For example, let’s say you buy $40,000 of equipment and expense it. Now your QBI 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 2023 QBI exceeds the threshold: $182,100 (or $364,200 on a joint return).


In this article, we bring you three Section 199A strategies you can implement before December 31, 2023, to help you obtain your optimal deduction. ... Log in to view full article.

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