Comments on: Sec. 199A Changes Retirement Planning

By: Hayk S

Hayk S — Thu, 31 May 2018 14:21:28 +0000

This is very INFORMATIVE.I want to learn more about how taxation works for individual business owner.Thank you for sharing your blog.

By: Steve

Steve — Wed, 30 May 2018 03:52:04 +0000

Tennessee is also a state with no tax on earned income. There is a tax on dividends and interest above a certain limit that doesn’t impact most residents – but no tax on earnings.

By: Steve

Steve — Sun, 27 May 2018 00:14:13 +0000

In reply to Betty. You could experiment (on scratch paper) with idea of using Sec. 199A for Roth conversions. The Roth conversion adds income to your tax return but the Sec. 199A might add an offsetting deduction.

By: Betty

Betty — Sat, 26 May 2018 21:40:37 +0000

My husband and I own two sole-proprietorship businesses and each year we contribute enough to our 401(k)s & IRAs to get our AGI below the Saver’s Credit threshold. (Thus, the $2k Saver’s Credit completely erases our income tax burden.)

Does this mean the new Sec. 199A deduction is essentially worthless for our situation?
The Sec. 199A only reduces taxable income, right? It won’t offset any of our pesky SE taxes?

I keep trying to find clever ways to use the new Sec. 199A to our advantage, but I can’t figure it out!

Thanks,
-Betty

By: Steve

Steve — Fri, 25 May 2018 21:40:30 +0000

In reply to Solo Prosperity. Solo, I don't think so. Look at it this way: If you have a potentially taxable account that, due to Sec. 199A, isn't actually taxable, that's better than a tax-deferred account. Neither account will per this example generate taxable income in, say, 2018. But the tax-deferred account may trigger taxes in some future year. Another way to say the same thing: Tax-free beats tax-deferred.

By: Solo Prosperity

Solo Prosperity — Fri, 25 May 2018 20:10:15 +0000

Don’t forget the tax-deferred growth in an IRA or 401k. It would get very granular and depend on time horizon, but once that is considered, it seems as though the tax-deferred account still wins in most cases.