Lawrence Pon, CPA at Pon & Associates in Redwood City, Calif., offered an example of a plan that might play out – and perhaps not even involve a pension. A consultant will earn $315,000 this year; her husband’s income is $72,000. The couple also has $48,000 in dividends and capital gains, for an AGI is $435,000. After maxing out her SEP and her self-employed medical insurance deduction, her AGI is $356,000. Her itemized deductions total $28,000, meaning her taxable income is $328,000.
“She can do two things to get the QBI deduction,” Pon said. “Open a DB plan and put at least $70,000 into the plan, or open a donor advised fund and fund it with $15,000 of low-cost basis stock,” an alternative he called “easier and cheaper.”