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To the author, you should also consider the "Section 199A" part of the tax code in your calculations which allow you to deduct up to 20% of gross income from yo

To the author, you should also consider the "Section 199A" part of the tax code in your calculations which allow you to deduct up to 20% of gross income from your taxes, thus would drop your bracket from 24% thus would make your single example be capped at 22% or your MFJ at 15%. Huge tax savings. https://www.irs.gov/newsroom/qualified-business-income-deduction https://www.irs.gov/newsroom/qualified-business-income-deduc... I would hire a CPA to advise you. I did this year and it saved me almost $30,000 in taxes had we not used the 199a.

sfblah 5y ago
My recollection is all these Trump sole proprietor tax cuts specifically don’t apply to someone like a consultant/contractor. There’s something in the law about people who are primarily selling “their own expertise.” Am I wrong on that?
- snow_mac 5y ago
  There was an update in 2018 to the original laws. > Therefore, self employed IT professionals such as programmers and software engineers will be eligible to take the deduction. However, they will still have to contend with some limits to the deduction that apply over certain income levels. For higher income IT professionals, it may be beneficial to operate as an S Corp and pay yourself wages to enable you to qualify for the QBI deduction. SEE: http://kbfinancialadvisors.com/making-the-switch-from-employee-to-self-employed-pass-through-income-and-the-section-199a-deduction/ http://kbfinancialadvisors.com/making-the-switch-from-employ...
- snow_mac 5y ago
  My CPA and tax attorney would say otherwise....
  - sfblah 5y ago
    In your view, were you “aggressive” in your approach to this? Or is your view that contractors absolutely qualify?
    - snow_mac 5y ago
      I don't think so. The firm I contract for requires me to work through MBO and use a CPA, which of both have a ton of advice and research on the 199A... See this: > Under the law, most trades or businesses are “qualifying” businesses. However, for certain types of businesses, referred to as “specified businesses,” the deduction is only available to a more limited extent. “Specified businesses” include (among others) any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, and “any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees.” In particular, there had been considerable concern that the IRS might view the “skill or reputation” clause broadly. > The proposed regulations, however, take the approach that the “skill or reputation” clause is meant to refer to a “narrow set of businesses,” and generally limits it to people such as reality TV stars, media hosts, and professional gamers, as well as celebrities making money off of product or likeness endorsements. https://www.mbopartners.com/blog/contracts-finance/section-199a-making-sense-of-the-qualified-business-income-deduction-for-independent-professionals-in-2018/ https://www.mbopartners.com/blog/contracts-finance/section-1...

sfblah 5y ago

My recollection is all these Trump sole proprietor tax cuts specifically don’t apply to someone like a consultant/contractor. There’s something in the law about people who are primarily selling “their own expertise.” Am I wrong on that?

snow_mac 5y ago
There was an update in 2018 to the original laws. > Therefore, self employed IT professionals such as programmers and software engineers will be eligible to take the deduction. However, they will still have to contend with some limits to the deduction that apply over certain income levels. For higher income IT professionals, it may be beneficial to operate as an S Corp and pay yourself wages to enable you to qualify for the QBI deduction. SEE: http://kbfinancialadvisors.com/making-the-switch-from-employee-to-self-employed-pass-through-income-and-the-section-199a-deduction/ http://kbfinancialadvisors.com/making-the-switch-from-employ...
snow_mac 5y ago
My CPA and tax attorney would say otherwise....
- sfblah 5y ago
  In your view, were you “aggressive” in your approach to this? Or is your view that contractors absolutely qualify?
  - snow_mac 5y ago
    I don't think so. The firm I contract for requires me to work through MBO and use a CPA, which of both have a ton of advice and research on the 199A... See this: > Under the law, most trades or businesses are “qualifying” businesses. However, for certain types of businesses, referred to as “specified businesses,” the deduction is only available to a more limited extent. “Specified businesses” include (among others) any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, and “any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees.” In particular, there had been considerable concern that the IRS might view the “skill or reputation” clause broadly. > The proposed regulations, however, take the approach that the “skill or reputation” clause is meant to refer to a “narrow set of businesses,” and generally limits it to people such as reality TV stars, media hosts, and professional gamers, as well as celebrities making money off of product or likeness endorsements. https://www.mbopartners.com/blog/contracts-finance/section-199a-making-sense-of-the-qualified-business-income-deduction-for-independent-professionals-in-2018/ https://www.mbopartners.com/blog/contracts-finance/section-1...