Will the Deductibility of My Retirement Plan Contributions be Impacted by the QBI Rules?
The Qualified Business Income (QBI) deduction allows for up to a 20% tax deduction for “Qualified Business Income” of a pass-through entity. This is one of the biggest new deductions available due to the new 2018 tax law changes. However, your retirement plan contribution deductibility could be impacted by the QBI deduction rules.
Do you own a pass-through entity (anything but a C-Corporation) and have Qualified Business Income?
In order to be eligible for the QBI deduction, your business must not be a C-Corp and also must be a Qualified Business with income. If you meet the above criteria, you may be eligible to receive a 20% deduction on the lesser of taxable income reduced by capital gains and qualified dividends OR QBI plus and positive qualified REIT dividends and publicly traded partnership income, depending on your business income.
Do you have multiple businesses?
If you do, please reference the “Am I Eligible for A Qualified Business Income Deduction?” flowchart. If not, move on to the next question.
Is your Qualified Business Income over $157,500 ($315,000 if married)?
If your QBI is over the above limit, your retirement plan deductibility may be impacted by the QBI deduction-reduction effect. Your deductibility may be reduced to 80% of the amount contributed.
Please see both this article’s corresponding flowchart here as well as the “Am I Eligible for A Qualified Business Income Deduction?” flowchart here to learn more.
If you have questions regarding Qualified Business Income or other general retirement planning advice, please give us a call at 303-440-2906 or click here to schedule a time to speak with us.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
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