Section 199A: The 20% Small Business Deduction

In 2017, the National Federation of Independent Business (NFIB) collaborated with Congress to enact significant tax relief measures for small businesses. The main change to small business tax measures is in Section 199A.

Section 199A is known as the 20% Small Business Deduction. This deduction is limited to 20% of taxable income. However, there are net income limitations to this deduction. There are also specific service trades or businesses (SSTBs) that may get a partial deduction from their income. According to the IRS, there are the income limitations for the Qualified Business Income deductions for 2024:

If your filing status is single and your taxable income is less than $191,950, your deduction is 20%.

If your filing status is single and your taxable income is between $191,951 to $241,950, you qualify for partial SSTBs.

If your filing status is married filing jointly and your taxable income is $383,900, your deduction is 20%.

If your filing status is married filing jointly and your taxable income is between $383,901 to $483,900 then you qualify for partial SSTBs.

Lastly, if your income is above the threshold set by the IRS then you may not qualify for Section 199A deduction.

If you want to file a Section 199A deduction, you need to see if you qualify for it and understand how it works. It is always a good idea to check with one of our CPAs or a tax professional who can explain this deduction to you and review its impact on your business.

For more information, please contact The Center for Financial, Legal, & Tax Planning Inc. professionals at (618) 997-3436.