How to Find Your 2026 Section 199A Deduction with Multiple Businesses
By 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 allows many owners of sole proprietorships, partnerships, and S corporations to deduct up to 20 percent of their qualified business income. Even better, Congress has now made this deduction permanent, which means proper planning is more valuable than ever.
When you own multiple businesses, the calculation becomes much more complicated. Depending on your taxable income, you may have the opportunity 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 enhance the deduction by the amount of W-2 wages paid or business property owned. One business may have plenty of wages but little income, while another has strong profits but few wages. If the businesses qualify for aggregation, combining them can produce a significantly larger deduction than what results from calculating each business separately.
Businesses that generate losses require special attention as well. A loss from one business can reduce the deduction available from your profitable businesses, making accurate calculations especially important.
The rules governing aggregation are highly technical, and not every business qualifies. In addition, if you elect to aggregate, you generally must continue using that approach in future years unless the facts change.
If you want to discuss how the Section 199A deduction works with multiple businesses, please call me directly at 408-778-9651