First things first. For your Section 199A tax deduction, you don’t have to think about the wages your business paid employees (including you if you were an employee in your business) if your taxable income is equal to or less than $315,000 (married, filing jointly) or $157,500 (filing as single or head of household).
If your taxable income is equal to or less than the threshold, you qualify for the 20 percent deduction based on the lesser of your
taxable income less defined capital gains or
defined qualified business income (QBI).
That’s it. Easy-peasy.
But if you have partners in a partnership or shareholders in an S corporation, the wages could be important to their Section 199A tax deduction.
Also, you don’t have to think about wages connected with an out-of-favor specified service trade or business when your taxable income is equal to or greater than $415,000 (married, filing jointly) or $207,500 (filing single or as head of household), because your Section 199A deduction for that out-of-favor business is zero.
To summarize, your Section 199A tax deduction will benefit from your business’s W-2 wages paid to you and your employees if ... Log in to view full article.