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Maximizing the 199A Deduction: Increasing Assets and Wages, Separating and Aggregating Businesses, and More

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Monday, June 13, 2022

Recorded event now available

This course will provide advisers to businesses with strategies to increase the generous 20 percent QBI (qualified business income) deduction under 199A. The panel will cover tips to maximize W-2 income and assets when applicable, separating and aggregating businesses, and other planning tips.

Description

Initially, practitioners worked to grasp the basic concepts, eligibility, and reporting the 199A deduction. Now with the basics understood, advisers are taking proactive steps to maximize this tax-saving deduction.

The calculation, in its purest form, is 20 percent of qualified income. The calculation requires extra time and adds an extra layer of complexity to every return with a taxable business. For income exceeding certain thresholds, the deduction is limited to the lesser of 20 percent of QBI or the greater of 50 percent of W-2 wages paid by the business or the total of 2.5 percent of UBIA (unadjusted basis after initial acquisition) plus 25 percent of W-2 wages.

There are planning opportunities to explore for the subset of taxpayers subject to the W-2 and UBIA thresholds. Increasing salaries and buying additional property would quickly increase the deduction for businesses subject to the W-2 and UBIA limitations but would also increase costs as well. Knowing the potential caveats of each strategy to determine when the benefit of the 20 percent deduction outweighs any additional costs is critical.

Various strategies surround the 199A deduction. Ensuring a business' income is qualified, staying under thresholds, increasing asset acquisition costs, and increasing W-2 wages are just a few approaches that can significantly impact a taxpayer's deduction. Less apparent are strategies surrounding sales of businesses, businesses with losses, and for converting nonqualified income.

Listen as our panel of experts divulges strategies for maximizing the deduction under 199A.

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Outline

  1. QBI: an overview
  2. Individual threshold
  3. Maximizing W-2 wages
  4. Increasing UBIA
  5. SSTBs
  6. Aggregating and separating businesses
  7. Converting non-qualified income
  8. Planning for sells
  9. Planning for NOLs
  10. Other tips

Benefits

The panel will review these and other important issues:

  • Maximizing W-2 wages
  • Increasing asset acquisition costs
  • Converting non-qualifying income to QBI
  • QBI deduction planning for pending sales

Faculty

Fuller, Pamela
Pamela A. Fuller, Esq., J.D., LL.M.
Senior Counsel (Tax, M&A, International)
Tully Rinckey PLLC and Zahn Law Group

Ms. Fuller is a corporate and international tax attorney with over 20 years experience in advising a wide range of...  |  Read More

Palovick, Sara
Sara A. Palovick, CPA
Tax Partner
Withum Smith+Brown

Ms. Palovick specializates in real estate, and focuses most of her time in the areas of partnership and individual...  |  Read More