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Taxes Strategy no bullshit

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Ama

New Contributor
Dec 2, 2017
8
5
12
California
Hi everyone, am in the process of changing accountants and looking for tax strategies. There are many different forms, deductions confusing the big picture to me. Please correct this if it is wrong, any help is greatly appreciated.

Gross Wages + K1 + LLC income - deductions - QBI = net income that is subject to federal and state taxes.

What is the order each of these numbers are calculated and when is QBI applied? Does QBI disappear completely after the 415,000 threshold? During our interview process a cpa said that even with earners with over a million in profit could still have the qbi deduction, vastly different from another cpa we have talked to.

What tax strategies are you guys using to protect the funds or control them rather than see them disappear every quarter?

A lof of you may also come from real estate, with big losses due to repairs and bonus depreciation, what are ways to use these losses against profits from another business? Are businesses all netted together at the end of the day or are these real estate holdings supposed to stay in their own bubble and carry their own losses forward, never being able to offset profit from other K1s and LLCs?
 

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Lyinx

Bronze Contributor
FASTLANE INSIDER
I've Read UNSCRIPTED
Speedway Pass
Oct 28, 2019
358
433
194
Lancaster County, PA
Hi everyone, am in the process of changing accountants and looking for tax strategies. There are many different forms, deductions confusing the big picture to me. Please correct this if it is wrong, any help is greatly appreciated.

Gross Wages + K1 + LLC income - deductions - QBI = net income that is subject to federal and state taxes.

What is the order each of these numbers are calculated and when is QBI applied? Does QBI disappear completely after the 415,000 threshold? During our interview process a cpa said that even with earners with over a million in profit could still have the qbi deduction, vastly different from another cpa we have talked to.

What tax strategies are you guys using to protect the funds or control them rather than see them disappear every quarter?

A lof of you may also come from real estate, with big losses due to repairs and bonus depreciation, what are ways to use these losses against profits from another business? Are businesses all netted together at the end of the day or are these real estate holdings supposed to stay in their own bubble and carry their own losses forward, never being able to offset profit from other K1s and LLCs?
if they are a good cpa, tell them that you thought that certain thing doesn't apply to you, and where they get their reasoning from?

I've seen some shady CPA's that just change the numbers on paperwork, those are the ones that will get you into trouble. You are responsible to make sure that they are doing their job (or that you trust them enough that if you get audited, you would be willing to pay the bill if there is a difference)

At the end of the day, it's your a$$ on the line, not theirs (if they are competent anyway)
 

JScott

Legendary Contributor
EPIC CONTRIBUTOR
Speedway Pass
Aug 24, 2007
4,570
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A lof of you may also come from real estate, with big losses due to repairs and bonus depreciation, what are ways to use these losses against profits from another business? Are businesses all netted together at the end of the day or are these real estate holdings supposed to stay in their own bubble and carry their own losses forward, never being able to offset profit from other K1s and LLCs?

Depends on the type of "real estate" losses you have...

If they are active/ordinary income losses (like from flipping houses), they can be used to offset active/ordinary income gains from other businesses.

If they are passive losses, such as rental property losses or depreciation, then passive loss rules apply. These rules state that these losses can only be used to offset passive gains UNLESS you qualify as a Real Estate Professional under IRS guidelines.

To qualify as a REP, you need to spend at least 750 hours on qualified tasks (a specific set of real estate related tasks), and you have to spend more hours in those tasks than any other professional endeavor.

If you qualify as REP, you can then use the passive losses from real estate to offset other active/ordinary business income.

Btw, this is one of the best ways to reduce your tax burden -- large depreciation write-offs coupled with REP status.
 

Phil Yu

New Contributor
Aug 25, 2020
14
6
12
USA, CA
Accountant whose studying for his CPA and working on QBI in his study course right now

QBI deduction doesnt disappear after you pass the upper threshold.

2 type of income qualify for OBI - SSTB and your ordinary business income
SSTB is income from business such as accounting service, lawyer, Health, consulting, athletes, performing arts...etc

Threshold -
Married Joint filing - 326.6k (lower threshold) to 426K (upper threshold
Everyone else - 163.3 k (lower threshold) to 213.3k (upper threshold)

Above the upper threshold the QBI - all SSTB is gone. 2 steps to calculate
OBI is lower of (step 2) 20% of OBI vs greater of 50% wage paid vs 2.5% property cost + 25%wage paid (step 1)

Between the 2 threshold.
It is really messy to explain - in our course, it is a chart.

below the threshold.
20% deduction for all

hope this help
 

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