{"id":1374,"date":"2018-09-08T13:12:29","date_gmt":"2018-09-08T13:12:29","guid":{"rendered":"https:\/\/wcginc.com\/?p=1374"},"modified":"2026-01-26T16:37:19","modified_gmt":"2026-01-26T16:37:19","slug":"maximize-section-199a-deduction","status":"publish","type":"post","link":"https:\/\/wcginc.com\/blog\/maximize-section-199a-deduction\/","title":{"rendered":"Maximize Section 199A Deduction"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-68b5b5976af30\" class=\" wd-rs-68b5b5976af30 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><\/p>\n<div class=\"overview\">\n<h2><span class=\"ez-toc-section\" id=\"Key_Takeaways\"><\/span>Key Takeaways<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Section 199A deduction, introduced by the 2017 Tax Cuts and Jobs Act, can be complex to calculate and optimize.<\/li>\n<li>Deduction limits depend on <b>W-2 wages<\/b> and <b>net business income (NBI)<\/b>; the goal is to balance both for maximum benefit.<\/li>\n<li>The \u201cmagic\u201d salary percentage to equalize W-2 and NBI limits is around <b>27.9% of net business income<\/b>, though practical guidance often cites 28.57%.<\/li>\n<li>Most S Corp shareholder salaries fall between <b>35\u201345% of net business income<\/b>, which usually exceeds the Section 199A optimization threshold.<\/li>\n<li>Increasing shareholder salary can maximize the deduction but may also raise <b>Social Security, Medicare, and payroll taxes<\/b>, reducing the net benefit.<\/li>\n<li>Optimization provides a <b>modest tax advantage<\/b> compared to the cost of higher payroll taxes; the actual gain can be relatively small.<\/li>\n<li>Section 199A rules also apply to rental properties and depend on the <b>definition of a trade or business<\/b> under IRS regulations.<\/li>\n<li>Careful planning and reasonable salary determination are key to complying with IRS rules while maximizing deductions.<\/li>\n<\/ul>\n<\/div>\n<p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-6733430200fce\" class=\" wd-rs-6733430200fce wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title img-right \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>The Section 199A qualified business income deduction is a wonderful offspring from the Tax Cuts and Jobs Act of 2017. It is certainly elusive when thinking about Section 199A deduction calculation given the problems with specified service trade or business, and the mixture of revenue sources. However, it is equally elusive when it comes to the optimization of the Section 199A deduction.<\/p>\n<p>Given all that you\u2019ve learned about Section 199A deduction limitations and phaseouts, such as W-2 and net business income, there is a magical percentage where your W-2 and net business income limits are the same. Huh? On one hand we don\u2019t want salary too high because we pay too much in Social Security and Medicare taxes. On the other hand we don\u2019t want salary too low because we are limiting the Section 199A deduction.<\/p>\n<p>So we attempt to set these two limits equal to each other\u2026 just like the old fashioned solver plugin for MS Excel. \u201cHey Excel! What up?! Can you change a few variables for me until these two numbers are equal? By the way, it might be circular too. Good luck.\u201d<\/p>\n<p>You might have seen a number of 28.57%. This is practically correct, but technically incorrect since it does not factor in employer payroll taxes. We say practically correct since the difference is immaterial. Here is an analysis-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_raw_html css=&#8221;&#8221;]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[\/vc_raw_html]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-6733432419feb\" class=\" wd-rs-6733432419feb wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>We assumed that employer payroll tax portion is 8% of the salary. This includes\u00a0<a href=\"https:\/\/www.ssa.gov\/\" target=\"_blank\" rel=\"noopener noreferrer\">Social Security<\/a><strong>,<\/strong>\u00a0Medicare and unemployment taxes. This might be higher in some states, but let\u2019s play along with 8%.<\/p>\n<p>As you can see, the $25,000 salary (or 25%) results in Section 199A deduction being limited by W-2 amount. Next, the $40,000 salary results in Section 199A deduction being limited by net business income (NBI).<\/p>\n<p>Using Excel\u2019s solver plug-in, or manually changing the salary to bracket the two limits, results in a salary of $27,935 or 27.9%. This magical W-2 optimization for maximizing Section 199A deduction means that both W-2 and net business income limits are the same, and neither is specifically controlling.<\/p>\n<p>Wait, there\u2019s more to consider!<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-6733432ed1540\" class=\" wd-rs-6733432ed1540 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Reasonable_Shareholder_Salary\"><\/span>Reasonable Shareholder Salary<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>While Section 199A salary optimization is important, we must honor the overall theme of reasonable shareholder salary. We take a deep dive into reasonable salary calculations with all the IRS rules, tax court cases, methodologies and rules of thumb. This button will take you there-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_row_inner equal_height=&#8221;yes&#8221; content_placement=&#8221;middle&#8221; el_id=&#8221;getting-started&#8221; css=&#8221;.vc_custom_1728658184377{padding: 30px !important;background-color: #F4F1E8 !important;border-radius: 10px !important;}&#8221; woodmart_css_id=&#8221;67093aa4d95c5&#8243; responsive_spacing=&#8221;eyJwYXJhbV90eXBlIjoid29vZG1hcnRfcmVzcG9uc2l2ZV9zcGFjaW5nIiwic2VsZWN0b3JfaWQiOiI2NzA5M2FhNGQ5NWM1Iiwic2hvcnRjb2RlIjoidmNfcm93X2lubmVyIiwiZGF0YSI6eyJ0YWJsZXQiOnt9LCJtb2JpbGUiOnt9fX0=&#8221; mobile_bg_img_hidden=&#8221;no&#8221; tablet_bg_img_hidden=&#8221;no&#8221; woodmart_parallax=&#8221;0&#8243; woodmart_gradient_switch=&#8221;no&#8221; woodmart_box_shadow=&#8221;no&#8221; wd_z_index=&#8221;no&#8221; woodmart_disable_overflow=&#8221;0&#8243; row_reverse_mobile=&#8221;0&#8243; row_reverse_tablet=&#8221;0&#8243;][vc_column_inner width=&#8221;4\/12&#8243;][vc_single_image image=&#8221;44014&#8243; img_size=&#8221;full&#8221; css=&#8221;&#8221; parallax_scroll=&#8221;no&#8221; woodmart_inline=&#8221;no&#8221;][\/vc_column_inner][vc_column_inner width=&#8221;8\/12&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-678dcb0ac1a3f\" class=\" wd-rs-678dcb0ac1a3f wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none with-btn box-btn-static \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Reasonable_S_Corp_Salary\"><\/span>Reasonable S Corp Salary<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Determine a reasonable S Corp shareholder salary by avoiding extremes and using fluid guidelines.<\/p>\n<\/div>\n\n\t\t\t\t\t\t<div class=\"info-btn-wrapper\"><div id=\"wd-6a31cd3f40d06\" class=\"  wd-button-wrapper text-left\"><a href=\"https:\/\/wcginc.com\/business-services\/s-corp-salary\/\" title=\"\" class=\"btn btn-style-default btn-shape-rectangle btn-size-default\">Learn More<\/a><\/div><\/div>\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][\/vc_row_inner]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-6733433916af6\" class=\" wd-rs-6733433916af6 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Most of our clients find themselves in the 35% to 45% range? What does this mean? This means shareholder salaries are about 35% to 45% of the net business income before salaries are paid out. In other words, if you earn $100,000 your salary would be $35,000 to $45,000. This is not a safe harbor calculation since it does not exist; it is simply an observation or survey of the payrolls we process for S corporations.<\/p>\n<p>Ok. Take this one step further. If Section 199A deduction is optimized at 27.9% and a lot of our clients are around 35% to 45%, W-2 wages is not the limiting factor since 35% is greater than 27.9%, even in Canada.<\/p>\n<p>But what about the Amazon retailer who can justify a salary that comes in at 20% of net business income? He or she will be limited by W-2 wages (assuming it is just one person on the payroll- the shareholder).<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-673343405b1a1\" class=\" wd-rs-673343405b1a1 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Cost_of_Increasing_Shareholder_Salary\"><\/span>Cost of Increasing Shareholder Salary<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>So why not just bump up the shareholder salary to 27.9% every time? You can\u2026 sure\u2026 but let\u2019s look at the cost to do that. Here\u2019s another telling table-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_raw_html css=&#8221;&#8221;]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[\/vc_raw_html]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-673343486c261\" class=\" wd-rs-673343486c261 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>What did we do here? We assumed a $200,000 net business income before shareholder salary is paid. Let\u2019s say we were paying $40,000 and we read this amazing article on WCG (formerly Watson CPA Group)\u2019s website that suggests a salary of $55,800 would maximize Section 199A deduction. How does that convert into cash in pocket?<\/p>\n<p>By having a salary too low we lost $2,499 assuming a 22% marginal tax rate. In other words, since our Section 199A deduction is limited by our W-2 of $40,000, we lost $2,499 in tax benefit. The calculation is 22% x the difference in Section 199A calculations between W-2 limit and net business income limit ($11,360 x 22% is $2,499).<\/p>\n<p>But the cost of increasing reasonable S Corp shareholder salary to $55,800 also increased Social Security, Medicare and other payroll taxes by $2,195.\u00a0<strong>A quick note of caution here-<\/strong>\u00a0the employer portion was assumed to be 8% however, there is an income tax deduction since this 8% decreases the net business income and therefore reduces income taxes. In other words, 8% is truly 8% x (1 \u2013 22%) or about 6.24%. We are getting deep into the weeds here, but you get the idea.<\/p>\n<p>All these gyrations end up with $305 in your pocket. Not bad. A night at\u00a0<a href=\"https:\/\/www.newyorknewyork.com\/en\/restaurants\/gallaghers-steakhouse.html\" target=\"_blank\" rel=\"noopener noreferrer\">Gallagher\u2019s<\/a>\u00a0on the house!<\/p>\n<p>Also keep in mind that as salaries increase beyond the social security wage and unemployment wage caps, the payroll tax portion will change resulting in a different equilibrium percentage. This is why we suggest that the 28.57% number floating around out there on the internets, yes, plural, is practical but not exact.<\/p>\n<p>If you are sitting there scratching your head and saying, \u201cWhat is this Section 199A deduction you speak of?\u201d you are in good hands. We have a massive article on the topic with some cool examples with Fred, Barney, Wilma and Mr. Slate-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_row_inner equal_height=&#8221;yes&#8221; content_placement=&#8221;middle&#8221; el_id=&#8221;getting-started&#8221; css=&#8221;.vc_custom_1728658184377{padding: 30px !important;background-color: #F4F1E8 !important;border-radius: 10px !important;}&#8221; woodmart_css_id=&#8221;67093aa4d95c5&#8243; responsive_spacing=&#8221;eyJwYXJhbV90eXBlIjoid29vZG1hcnRfcmVzcG9uc2l2ZV9zcGFjaW5nIiwic2VsZWN0b3JfaWQiOiI2NzA5M2FhNGQ5NWM1Iiwic2hvcnRjb2RlIjoidmNfcm93X2lubmVyIiwiZGF0YSI6eyJ0YWJsZXQiOnt9LCJtb2JpbGUiOnt9fX0=&#8221; mobile_bg_img_hidden=&#8221;no&#8221; tablet_bg_img_hidden=&#8221;no&#8221; woodmart_parallax=&#8221;0&#8243; woodmart_gradient_switch=&#8221;no&#8221; woodmart_box_shadow=&#8221;no&#8221; wd_z_index=&#8221;no&#8221; woodmart_disable_overflow=&#8221;0&#8243; row_reverse_mobile=&#8221;0&#8243; row_reverse_tablet=&#8221;0&#8243;][vc_column_inner width=&#8221;4\/12&#8243;][vc_single_image image=&#8221;44014&#8243; img_size=&#8221;full&#8221; css=&#8221;&#8221; parallax_scroll=&#8221;no&#8221; woodmart_inline=&#8221;no&#8221;][\/vc_column_inner][vc_column_inner width=&#8221;8\/12&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-681459e49b578\" class=\" wd-rs-681459e49b578 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none with-btn box-btn-static \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-800 box-title-style-default font-primary wd-fontsize-m\">Section 199A Deduction<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Find helpful insights, summaries, and resources to understand this important tax benefit.<\/p>\n<\/div>\n\n\t\t\t\t\t\t<div class=\"info-btn-wrapper\"><div id=\"wd-6a31cd3f40dbe\" class=\"  wd-button-wrapper text-left\"><a href=\"https:\/\/wcginc.com\/section-199a-deduction\/\" title=\"\" class=\"btn btn-style-default btn-shape-rectangle btn-size-default\">Learn More<\/a><\/div><\/div>\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][\/vc_row_inner]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-673343509f604\" class=\" wd-rs-673343509f604 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Here is our summary of the major issues recently updated by the final regulations, rental property safe harbor (<a href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/n-19-07.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Notice 2019-7<\/a>) and how all this crud affects S corporations-<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_row_inner equal_height=&#8221;yes&#8221; el_class=&#8221;boxes&#8211;pack&#8221; woodmart_css_id=&#8221;672d69041513d&#8221; responsive_spacing=&#8221;eyJwYXJhbV90eXBlIjoid29vZG1hcnRfcmVzcG9uc2l2ZV9zcGFjaW5nIiwic2VsZWN0b3JfaWQiOiI2NzJkNjkwNDE1MTNkIiwic2hvcnRjb2RlIjoidmNfcm93X2lubmVyIiwiZGF0YSI6eyJ0YWJsZXQiOnt9LCJtb2JpbGUiOnt9fX0=&#8221; mobile_bg_img_hidden=&#8221;no&#8221; tablet_bg_img_hidden=&#8221;no&#8221; woodmart_parallax=&#8221;0&#8243; woodmart_gradient_switch=&#8221;no&#8221; woodmart_box_shadow=&#8221;no&#8221; wd_z_index=&#8221;no&#8221; woodmart_disable_overflow=&#8221;0&#8243; row_reverse_mobile=&#8221;0&#8243; row_reverse_tablet=&#8221;0&#8243;][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27a8dd031\" class=\" wd-rs-689a27a8dd031 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"622\" height=\"622\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/Deduction-General-1.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A Deduction General<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Optimize Your Section 199A Deduction With Ideal W-2 Salary Insights And Detailed Calculations.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/business-services\/section-199a-deduction\/\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27b38f401\" class=\" wd-rs-689a27b38f401 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"622\" height=\"622\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/S-Corp-Section-199A-1.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A and S Corps<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Learn about the Section 199A Qualified Business Income Deduction, a key tax benefit.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/blog\/section-199a-s-corp-benefits\/\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27b999d19\" class=\" wd-rs-689a27b999d19 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"300\" height=\"189\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/294631_2437589431_section_199a_rental_property_300-3.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A and Rentals<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Learn section 199A trade or business definition and its connection to section 162 regulations.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/blog\/section-199a-rental-income-safe-harbor\/\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][\/vc_row_inner]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-6733435890edb\" class=\" wd-rs-6733435890edb wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p><em>Jason Watson, CPA is the Managing Partner of WCG (formerly Watson CPA Group), a business consultation and tax preparation firm, and is the author of\u00a0<a href=\"https:\/\/www.wcginc.com\/book\" target=\"_blank\" rel=\"noopener noreferrer\">Taxpayer\u2019s Comprehensive Guide on LLC\u2019s and S Corps<\/a>which is available online.<\/em><\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[vc_row_inner equal_height=&#8221;yes&#8221; el_class=&#8221;boxes&#8211;pack&#8221; woodmart_css_id=&#8221;672d69041513d&#8221; responsive_spacing=&#8221;eyJwYXJhbV90eXBlIjoid29vZG1hcnRfcmVzcG9uc2l2ZV9zcGFjaW5nIiwic2VsZWN0b3JfaWQiOiI2NzJkNjkwNDE1MTNkIiwic2hvcnRjb2RlIjoidmNfcm93X2lubmVyIiwiZGF0YSI6eyJ0YWJsZXQiOnt9LCJtb2JpbGUiOnt9fX0=&#8221; mobile_bg_img_hidden=&#8221;no&#8221; tablet_bg_img_hidden=&#8221;no&#8221; woodmart_parallax=&#8221;0&#8243; woodmart_gradient_switch=&#8221;no&#8221; woodmart_box_shadow=&#8221;no&#8221; wd_z_index=&#8221;no&#8221; woodmart_disable_overflow=&#8221;0&#8243; row_reverse_mobile=&#8221;0&#8243; row_reverse_tablet=&#8221;0&#8243;][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27c104b4b\" class=\" wd-rs-689a27c104b4b wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"622\" height=\"622\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/final-reg.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A Final Regs Quickie<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Learn about the IRS definition of trade or business and its application under Section 199A.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/blog\/section-199-final-regulations\/\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27c70b569\" class=\" wd-rs-689a27c70b569 wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"622\" height=\"622\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/deep-dive-1.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A Final Regs Deep Dive<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Read our condensed 70-page Section 199A guide for small business owners in just one hour.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/blog\/section-199a-final-regulations\/\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][vc_column_inner width=&#8221;1\/3&#8243;]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-689a27cd3707a\" class=\" wd-rs-689a27cd3707a wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none srvc-txt-block \">\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"box-icon-wrapper  box-with-icon box-icon-simple\">\n\t\t\t\t\t\t\t<div class=\"info-box-icon\">\n\n\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"622\" height=\"622\" src=\"https:\/\/wcginc.com\/wp-content\/uploads\/book-pdf-3.jpg\" class=\"attachment-full size-full\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h4 class=\"info-box-title title wd-font-weight-600 box-title-style-default font-primary wd-fontsize-m\">Section 199A Final Regs PDF<\/h4>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><p>Read our condensed 70-page Section 199A guide for small businesses in an accessible PDF.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<a class=\"wd-info-box-link wd-fill\" aria-label=\"Infobox link\" href=\"\/wp-content\/documents\/Section199A-ProposedRegs.pdf\" title=\"\"><\/a>\n\t\t\t\t\t\n\t\t\t\t\t<style><\/style>\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column_inner][\/vc_row_inner]\t\t\t<div class=\"info-box-wrapper\">\n\t\t\t\t<div id=\"wd-68b5b5c33516d\" class=\" wd-rs-68b5b5c33516d wd-info-box wd-wpb text-left box-icon-align-top box-style- color-scheme- wd-bg-none border-btm-title faqs-wrap \">\n\t\t\t\t\t\t\t\t\t\t<div class=\"info-box-content\">\n\t\t\t\t\t\t<h2 class=\"info-box-title title box-title-style-default wd-fontsize-m\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\t\t\t\t\t\t<div class=\"info-box-inner reset-last-child\"><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_the_Section_199A_deduction\"><\/span>What is the Section 199A deduction?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A tax deduction for qualified business income for certain pass-through entities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_limits_the_Section_199A_deduction\"><\/span>What limits the Section 199A deduction?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>W-2 wages paid and net business income (NBI).<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_the_%E2%80%9Cmagic%E2%80%9D_salary_percentage_for_S_Corps\"><\/span>What is the \u201cmagic\u201d salary percentage for S Corps?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Around 27.9% of net business income to balance W-2 and NBI limits.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Do_most_S_Corps_pay_salaries_near_this_optimization_point\"><\/span>Do most S Corps pay salaries near this optimization point?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>No, most fall between 35\u201345% of net business income.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Will_increasing_salary_always_improve_the_deduction\"><\/span>Will increasing salary always improve the deduction?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Not necessarily; higher salaries increase payroll taxes and may reduce net benefit.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Are_rental_properties_eligible_for_Section_199A\"><\/span>Are rental properties eligible for Section 199A?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Yes, if they meet the trade or business definition under IRS rules.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_is_a_reasonable_shareholder_salary\"><\/span>What is a reasonable shareholder salary?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A salary that follows IRS guidelines, avoids extremes, and is proportional to business income.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Can_Section_199A_planning_be_done_manually\"><\/span>Can Section 199A planning be done manually?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Yes, using tools like Excel\u2019s Solver or by adjusting salary brackets carefully.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Does_the_optimization_always_result_in_large_tax_savings\"><\/span>Does the optimization always result in large tax savings?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Usually, the net benefit is modest after accounting for payroll taxes.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Where_can_I_learn_more_about_Section_199A\"><\/span>Where can I learn more about Section 199A?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>WCG offers detailed guides, examples, and PDFs on S Corps, rental properties, and IRS final regulations.<\/p>\n<\/div>\n\n\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t[\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_raw_html 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Magical number is 27.9%. See examples.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wcginc.com\/blog\/maximize-section-199a-deduction\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Maximize Section 199A Deduction\" \/>\n<meta property=\"og:description\" content=\"To maximize Section 199A deduction requires balancing reasonable S corp shareholder salary and net business income. Magical number is 27.9%. See examples.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/wcginc.com\/blog\/maximize-section-199a-deduction\/\" \/>\n<meta property=\"og:site_name\" content=\"WCG CPAs &amp; Advisors\" \/>\n<meta property=\"article:published_time\" content=\"2018-09-08T13:12:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-01-26T16:37:19+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/wcginc.com\/wp-content\/uploads\/006667_1305773050_fine_print_300.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"300\" \/>\n\t<meta property=\"og:image:height\" content=\"200\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jason Watson\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jason Watson\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"10 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Maximize Section 199A Deduction - WCG CPAs & Advisors","description":"To maximize Section 199A deduction requires balancing reasonable S corp shareholder salary and net business income. 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