How to Cut 2022 Your Income Taxes by 20%? - Palma Financial

Which Section of the IRS allows Businesses Owners to Cut their Taxable Income by 20?

Sec. 199A allows taxpayers to deduct 20% of qualified business income from a qualified trade or business.

In your year-end tax planning, don’t forget to take your Section 199A deduction into account. If you don’t, your deduction amount can result in an unfavorable $0.

Here is a potential year-end decision that, under the appropriate conditions, might (a) lower your income taxes and (b) increase your Section 199A deduction simultaneously.

Your business type, wages paid, and property may increase, decrease, or eliminate your Section 199A tax deduction if your taxable income exceeds $170,050 (or $340,100 on a joint return).

Consider adopting one or more of the options outlined below to improve your Section 199A deduction if your deduction amount is less than 20 percent of your qualifying business income (QBI).

Strategy 1: Harvest Capital Losses
Strategy 2: Make Charitable Contributions
Strategy 3: Buy Business Assets

Your taxable income is the income that is subject to taxation:

  • Establishes your eligibility for the Section 199A tax deduction.
  • This maximum amount can be deducted from your taxes under the provision
  • And the conditions under which you must have earned income or property to qualify for the maximum deductions.

You still have time until the end of the year to harvest capital losses to offset any capital gains that are harming your Section 199A deduction.

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