2026 Year-End Section 199A Tax Reduction Strategies
If you own a tax code–defined pass-through business, such as a sole proprietorship or an S corporation, the Section 199A deduction could save you thousands in federal income taxes.
This valuable deduction, now permanent, lets eligible business owners deduct up to 20 percent of qualified business income (QBI).
For 2026, new rules provide greater flexibility, including wider income phase-in ranges and a $400 minimum deduction for qualifying taxpayers.
But your deduction could shrink or disappear as your taxable income rises. Before December 31, consider these eight Section 199A tax-saving strategies:
1. Harvest capital losses. Selling losing investments can reduce taxable income and potentially increase your Section 199A deduction.
2. Make charitable contributions. Deductible donations, including appreciated stock, can lower taxable income without reducing QBI.
3. Buy business equipment. Qualifying purchases placed in service before year-end may generate immediate deductions.
4. Maximize personal deductions. Health savings account contributions, deductible state and local taxes, mortgage interest, and certain 401(k) deferrals can help.
5. Fund retirement accounts. Retirement contributions may reduce taxable income enough to increase your deduction.
6. Review W-2 wages. Additional wages or bonuses may increase the deduction for certain businesses subject to wage limitations.
7. Evaluate Roth conversions. Converting a traditional IRA to a Roth could increase taxable income and reduce your Section 199A deduction.
8. Review rental properties. Profitable rental activities may qualify for additional Section 199A deductions.
If you want to discuss the 199A deduction, please call me directly at 408-778-9651
By Leon Clinton