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Caution: 199A Calculator Is Business-by-Business without Aggregation

Your Section 199A deduction becomes more complicated when you have:

  • multiple in-favor trades or businesses; and
  • taxable income greater than $415,000 married, filing jointly, or $207,500, filing as single or head of household.

With multiple businesses and 1040 taxable income above the $415,000/$207,500 amounts, you likely need to consider aggregation.

Why? The business-by-business result can be dramatically different from the aggregate result.

Example. Jake is married, with taxable income on his Form 1040 of $691,657. He also operates the three businesses listed below, where we also list the qualified business income (QBI), W-2 wages, and unadjusted basis immediately after acquisition of qualified property.

If aggregation was available, Jake would use the totals above to find a Section 199A deduction of $94,131. Without aggregation, the three individual businesses produce a Section 199A deduction of only $37,340.

If you would like to review your businesses with us for Section 199A qualification, please do not hesitate to reach out to your team at Luster Tax Consulting to work through this with you. Please use the following link to book your complimentary strategy call with your team at Luster Tax Consulting.

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