If you own more than one business, you may be missing out on a larger Section 199A deduction without even realizing it.
The Section 199A deduction lets many owners of sole proprietorships, partnerships, and S corporations deduct up to 20 percent of their qualified business income. Congress has now made this deduction permanent, which means proper planning around it is more valuable than ever.
When you own multiple businesses, the calculation gets more complicated, and that complexity can work in your favor. Depending on your taxable income, you may be able to combine, or aggregate, certain businesses for purposes of computing the deduction. In the right circumstances, aggregation can substantially increase your tax savings.
Taxpayers with higher incomes can boost the deduction by the amount of W-2 wages paid or business property owned. One business may have plenty of wages but modest income, while another has strong profits but few wages on the books. If the businesses qualify for aggregation, combining them can produce a meaningfully larger deduction than calculating each one separately.
Businesses that generate losses need special attention too. A loss from one business can reduce the deduction available from your profitable businesses, which makes accurate, business-by-business calculations especially important before you decide anything. The aggregation rules themselves are highly technical, not every business qualifies, and once you elect to aggregate, you generally have to keep using that approach in future years unless the underlying facts change. That makes this a decision worth making deliberately rather than defaulting into.
What this means for you: If you own more than one business, this is worth a dedicated look rather than a quick estimate. Let us review whether aggregating your businesses would increase your deduction.
