Found Money For The Self Employed

33
Found Money For The Self Employed
Gray Easterling

If you file a Schedule C to report your business profit or loss on your individual tax return, you may be entitled to a very generous tax break beginning this year. Many of you will be able to deduct up to 20% of your qualified business income (net income after business deductions) before calculating your tax liability. For example, if you are self-employed and had net qualified business income of $100,000, you may be able to deduct $20,000 from that income—a tax savings of $5,000 if you are in a 25% tax bracket.  From what I have read, this new provision in the tax law is complicated. So, if you don’t have an experienced tax professional on your team already, you may need to start looking for one.

 

You do not have to itemize to realize this tax break. The deduction will not reduce your adjusted gross income, nor will it reduce your earnings for purposes of computing taxes for Social Security or Medicare. The theory behind this governmental generosity was to encourage small business owners to invest in their businesses, creating new jobs and helping grow the economy. It is too early to tell if this will happen, since many small business owners are not aware of the new law and how it will affect them. Several factors will determine your eligibility. If your total taxable income on a joint return is less than $315,000 ($157,500 single), you hit the jackpot and can deduct $20,000 of your qualified business income. If you work in “specified service” fields, including law, health care, accounting, performing arts, consulting, athletics and financial services as well as any business in which the “principal asset is the reputation or sill of one or more of their employees”, the deduction phases out between $157,500 and $207,500 (single) or $315,000 and $415,000 (joint). It’s an example of how to make something hard out of something simple.

 

If you think you might qualify for the deduction, but your income is approaching the designated limits, you could start a simplified employee pension (SEP) and make an appropriate contribution that would keep you under the limit, start a solo 401k if you and your spouse are the only employees, or possibly increase your charitable deductions if they will exceed the new standard deduction limits. All in all, the new rules offer a great money/tax saving opportunity. Just be sure you get the help you need from qualified tax professionals.

 

Have you heard Kenny Chesney’s new song? Some of the lyrics go like this: “Get along, on down the road. We’ve got a long way to go; scared to live, scared to die, we ain’t perfect but we try. Get along while we can. Always give love the upper hand. Paint a wall, learn to dance, call your mom, buy a boat. Drink a beer, sing a song, make a friend, can’t we all get along?” Sort of nonsensical in a way, but also asks an important question: can’t we all get along? In the book of Mark, doesn’t it say, “Love the Lord your God with all your heart and all your soul and all your mind. This is the first and greatest commandment. And the second is like it: Love your neighbor as yourself. All the law and the prophets depend on these two commandments.” So easy to read; so hard to do.

 

Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed.  This material is intended for informational purposes only and should not be construed or acted upon as individualized tax, legal or investment advice.  FSC Securities Corporation does not offer tax or legal advice.  The views expressed are not necessarily the opinion of FSC Securities Corporation. Financial Solutions Group is a marketing name.  Financial Solutions Group is located at 128 Versailles Boulevard, Alexandria, LA  71301.  We can be reached at (318) 448-3201. Securities, insurance and advisory services offered through FSC Securities Corporation, member FINRA/SIPC.