Planning for the 199A deduction in your practice

November 9, 2018

While the Tax Cuts and Jobs Act (TCJA) that was passed at the end of 2017 introduced a myriad of planning opportunities, Section 199A of this new piece of legislation opened up a lot of planning opportunities for white coat professionals.

Commonly known as the “QBI deduction,” the 199A deduction gives business owners the ability to claim a 20% deduction on “Qualified Business Income” when filing their personal tax returns. I wrote an in-depth article on the Section 199A deduction for Review of Optometric Business that was published earlier this month. In the article, I discuss the series of “if, then” questions and answers that you should ask yourself to determine (a) if you qualify for the deduction and, if so, (b) some of the planning opportunities that exist with this new deduction.

An important note: even though this was written for Review of Optometric Business and is looking at it through the filter of an optometrist, it’s important to know that the principles and rules will apply to anyone in healthcare, as the language that was used in Section 199A carves out a special set of rules and circumstances that apply to anyone in healthcare.

The language that was used in writing this piece of the new tax code could be interpreted as “specifically vague.” What I mean by that is that the language was very specific in how to calculate the deduction, but interpreting whether or not you are a “specified service business” (SSB) and thus have “specified service business income” (SSBI) have been somewhat open for interpretation. In addition, as this is the first year that taxpayers and their advisors are planning for this deduction, time will tell on whether the strategies implemented to claim the deduction will “pass the smell test” in the eyes of the IRS.

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