Do you own multiple businesses?02/14/2019
It is not uncommon for business owners to have multiple streams of revenue, often because they have more than one business entity. For those that do, there was a lot of confusion around how the Tax Cuts & Jobs Act (TCJA) would impact the taxes that these owners pay. The IRS recently released some clarification on Section 199A and what it means for business owners.
In most cases, those that own a sole proprietorship, partnership, S-Corp, trust or estate can deduct up to 20% of qualified business income (QBI); the deduction is not an option for business income from a C-Corp or for wage income. As long as you own at least 50% of a business for the majority of 2018, including the last day of the year, you can aggregate the income from these businesses to increase your QBI and thus the amount of the 20% deduction.
As expected, there are additional rules that must be followed. The deduction is only available for those whose 2018 taxable incomes is less than $315,000 for joint returns and $157,500 for individual filers. If you decide not to aggregate this year, you can still choose to do so in future years, however, once you aggregate you have to continue to do so going forward unless there is a major situational change. It gets a bit more complicated for owners of real estate companies and trusts.
In essence, we will be looking at most of our clients’ returns in a variety of ways to determine how to take the most advantage of the current tax laws. If you are the owner of multiple businesses, we encourage you to reach out to us as early as possible so we can review your specific situation and discuss your options for filing your 2018 returns. And if you have any questions at all, don’t hesitate to reach out to us. We are all in this together!