Four tax strategies you can use to reduce your income taxes and increase your 20% Pass-Through Income Section 199A deduction

Summary of Keypoints

• Purpose: The article outlines four tax planning strategies designed to reduce taxable income while increasing eligibility for the 20% Pass-Through Income deduction under IRC Section 199A.
• Capital loss harvesting: Taxpayers can offset capital gains that negatively affect the Section 199A deduction by realizing capital losses before year-end.
• Charitable contributions: Increasing itemized deductions through charitable giving can help reduce taxable income thresholds that limit the Section 199A deduction.
• Retirement contributions: Contributions to retirement accounts directly lower taxable income while allowing funds to continue growing tax-deferred.
• Asset purchases: Purchasing and placing qualifying assets in service before year-end allows full expensing through 100% bonus depreciation or Section 179, reducing taxable income.

Strategy #1: Harvest your capital losses. If capital gains are hurting your Section 199A deduction, you still have time before the end of the year to harvest your capital losses. These losses can then be used to offset those “harmful” gains.

Strategy #2: Do good and do well by making charitable contributions. You can use itemized deductions to reduce and/or eliminate “threshold” problems and increase your Section 199A deduction. Charitable contributions are the easiest way to increase your itemized deductions before the end of the year.

Strategy #3: Be sure to make your retirement contributions. Any retirement contributions you make directly reduce your taxable income. And you still have the money growing inside your retirement account. If you’ve got the money, funding your retirement accounts is a complete no-brainer.

Strategy #4: Buy bonus assets. Thanks to 100-percent bonus depreciation and Section 179 expensing, you can write off the entire cost of most assets you buy and place in service before December 31, 2018.