Take Advantage of Qualified Business Income (QBI) in 2019

| December 09, 2019

As the year end approaches, we are working with financial advisors to help pass-through entities (S-Corporations, Sole Proprietorships and Partnerships) use employer contributions to qualified retirement plans in order to take advantage of the 20% QBI deduction. The key to this planning is to get the business owner’s taxable income below the QBI phaseout thresholds (MFJ $321,400 (up from $315,000 in 2018) SF $160,750 ($157,500 2018).

For example, we were approached by a financial advisor for a realtor who has had another good year, estimating that they will earn $500,000 in 2019. We drafted a 401k Profit Sharing Plan and paired it with a Defined Benefit Plan that will allow for $180,000 in employer contributions, reducing his QBI to $320,000 and opening up the full 20% QBI Deduction ($64,000!) for 2019.  This has worked for larger employers as well. Several medical practices and CPA firms have used our services to establish plans this past month.

The key is to take the time to consult with you and your prospect to review plan options. We are happy to help; we can have the plan documents drafted and out for signature prior to 12/31 to help you gather assets and to help clients save for retirement (and reduce their taxes). Give us a call at 610-251-0670!