2019 Tax Planning Tip for Pass Through/Service Businesses

[Kevin Gray]

As we go into 2019, figured I'd share a  tax related planning tip that I personally feel will be important for business owners and RE professionals moving forward.  For complete details, please reach out to a tax professional.

- For pass through businesses (Sole prop, LLC, S-Corp, Partnerships), up to a 20% deduction is available for qualified business income. For specified service businesses (consultants), you only qualify if taxable income is under 315k for couples and 157k for others. If you're taxable income is near or above these levels, consider using Section 179 deductions to reduce your taxable income allowing you to qualify for the qualified business income deduction.

-Section 179 deductions have been increased from $500k up front to $1mill up front.  Also, personal property used to furnish lodging may now be eligible where it wasn't in previous years.

Keep in mind, if you're income is near 315k joint or 157k single, it may be a good idea to HOLD OFF on a full Section 179 depreciation of property up front and rather extend it over a number of years to take advantage of the 20% qualified business income deduction of pass through businesses in multiple years rather than just one.

Obviously the details are a little more complicated, but this is a strategy that can save you tens of thousands of dollars not only in 2019, but the years following if done right.

Best of luck!