The good news:
Section 199A of the new tax law gives you a hefty 20% deduction on your qualified business income when you have defined taxable income of $157,500 or less (single taxpayer) or $315,000 or less (married filing a joint return).
The bad news:
If your defined taxable income is more than $207,500 (single taxpayer) or $415,000 (married filing a joint return) and you are in the new law’s defined “out-of-favor” group, you get a zero Section 199A deduction. Not a penny. Nada.
Are you in the “out-of-favor” group?
As we mentioned last month, professionals like doctors and lawyers who have defined taxable incomes above the upper thresholds won’t get a deduction. But you’re also a big loser if your business has, as its primary asset, “the reputation or skill of one or more of the business’s owners or employees.”
How does all this affect you?
You’ll find out when you read my new article titled Tax Tips: Does Tax Reform Dislike Your Reputation or Skill?
Three ways our fact-filled article can help you:
- We’ll explain the problems you’re up against. The simple truth is that we don’t know at this time who the reputation and skill people are that the lawmakers dislike so much. Why the ambiguity? There are two problems that complicate matters as you’ll discover when you read the full article.
- We’ll provide examples of businesses that may (or may not) fall into the out-of-favor gray zone. In fact, we’ll provide six examples of businesses that are currently in that definitional limbo. Are you in one of those businesses? You’ll find out when you read the full article.
- We’ll tell you what to do if you’re denied the 20% deduction. Frankly, your options are not great. But there is one proactive step you can take. We’ll provide full details when you read the full article.