New Pass through deduction 20%

[caprivenky]

This year my gross may end up at 900k and with subtracting office and staff expenses may end up taking home 500-600k

1. Will this disqualify me from getting the 20% deductions

2 i max out my 401k profit sharing plan - are there any other ideas to bring the income down to 415k like DBP plans

 

thanks

[ENT Doc]

1.  Assuming the business you are referring to is as a physician and comprehensive of all income, yes.

2.  Yes.  Make less money.  In all seriousness, you *may* be able to set up a DBP, but there is a phase-out between $315k and $415k, which means that any DBP should probably be done based on its own merits and not because of the 20% deduction.

[jacoavlu]

Child tax credits begin to phase out at AGI $400k for MFJ also. If married with kids you should aim to get below that.

[Molar Mechanic]

DB plan or Mega Backdoor roth.  Pointed out below that anything Roth doesn't help with current taxes.  Doh!

DB plan is a fairly significant undertaking, with high overhead and long term comittment, but you can sock a ton of cash away that way.

Use of a conservation easement could be effective in your case, but it is far from riskless.

[jacoavlu]

Molar Mechanic wrote:

or Mega Backdoor roth.

Click to expand...

OP already maxes a 401k-PS plan. Additionally, mega backdoor Roth does not reduce AGI or taxable income.

[jhwkr542]

If you're the old dog and you only have a few young employees, absolutely consider a CBP.  At least get an illustration of what it might look like from a TPA.

[caprivenky]

Iam a doctor 44 years old with five full time employees
Married with two kids and wife works parties as a teacher

[jacoavlu]

caprivenky wrote:

Iam a doctor 44 years old with five full time employees
Married with two kids and wife works parties as a teacher

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assuming a $4000 child tax credit then, your marginal rate increases by 10% in the phaseout range between AGI $400k-$440k

 

[jhwkr542]

Agree with ENT then, a CBP would have to be done on its own merit (which still might make sense for you), but it probably wouldn't deduct enough to get your taxable income down low enough for the pass through deduction.  Remember, it's phased out from $315-$415k taxable income, so if after all deductions your taxable income is $410k, you're not getting much of a deduction.

[beagler]

Check out the marginal tax rates in the $315-415 phaseout, seem right?

Graph mid-way down:

https://www.kitces.com/blog/high-income-threshold-qbi-deduction-strategies-financial-advisor-specified-service-business/

[jacoavlu]

I didn't read the article but I think the graph applies to someone with income which would be 100% QBI, which would not be the case for a physician-owner in an S corp or partnership, nor a W2 employee, but maybe would apply to someone practicing full sole proprietorship/1099.

[I Find This Humerus]

caprivenky wrote:

This year my gross may end up at 900k and with subtracting office and staff expenses may end up taking home 500-600k

1. Will this disqualify me from getting the 20% deductions

2 i max out my 401k profit sharing plan – are there any other ideas to bring the income down to 415k like DBP plans

 

thanks

Click to expand...

What in the world do you do that you need 5 staff workers for a solo practice making close to 1 mil a year??

[Zaphod]

I Find This Humerus wrote:

caprivenky wrote:

This year my gross may end up at 900k and with subtracting office and staff expenses may end up taking home 500-600k

1. Will this disqualify me from getting the 20% deductions

2 i max out my 401k profit sharing plan – are there any other ideas to bring the income down to 415k like DBP plans

 

thanks

Click to expand…

What in the world do you do that you need 5 staff workers for a solo practice making close to 1 mil a year??

Click to expand...

Seems easy. Receptionist, MA, RN. Depending on field could be aesthetician, finance person, biller, call center, etc