It’s common to consider making your Idaho S corporation (versus yourself) a partner in your partnership: it saves you self-employment taxes.

 

Does this affect your Section 199A deduction? It does.

Guaranteed payments are not qualified Coeur d’Alene Idaho business income (QBI) for the Section 199A deduction.

The non-QBI guaranteed payment rule applies whether the partner receives the payment as an individual or as pass-through income from a Coeur d’Alene Idaho S corporation.

Your only options to claw back your Section 199A deduction with the S corporation as a partner are to

  • reduce or eliminate the partnership’s guaranteed payments, and take the income pro rata based on ownership percentage; or
  • use a special allocation of partnership tax items.

 

Keep the Coeur d’Alene Idaho S corporation self-employment tax savings in mind when considering your partnership activity. Often the savings can make the S-corporation-as-a-partner strategy well worth it.