Attention Successful Small Business Owners! This is potentially very beneficial for you if you fit in one of the scenarios that offer large benefits!The new Tax Reform Law in place since tax year beginning 1/1/2018 offers a potential opportunity for successful small business owners to sock away a significantly large pre-tax retirement plan contribution and have much of it “funded” by lower taxes. Even many tax pros are not aware and you need to act fast as 12/31/2018 is almost here!Small business owners operating as sole proprietors, LLCs and S Corp entities are eligible for a 20% tax deduction if, after business expenses, they make less than $315,000 (filing married) and $157,500 (filing single).This is Section 199A of the new tax code. Section 199A uses the term QBI (qualified business income) to describe the business income after business expenses are subtracted. If a single or married business owner earns a QBI more than those limits, they can contribute to one of several retirement account types, to drop their QBI into that “sweet spot” under the limits mentioned. (Note that C Corp businesses got their own tax reduction – Section 199A refers specifically to the business owners that are sole proprietors, LLCs and S Corp entities.)One quick simplified example. Sole Proprietor filing single makes $330K gross, has $120K expenses for a $210K QBI. With no action, they will pay about $73.5K in fed taxes and not qualify for the 20% Sect. 199A Tax Reform Deduction! That’s unfortunate!Instead, they make a $90K contribution to a defined benefit plan (business expense) reducing QBI from $210k to $120k, and get an additional 20% tax deduction since they are now under the $157,500 limit. They pay $33.6K in fed taxes, saving almost $40k in taxes, so the $90k contribution only “cost” about $50K when considering the $40K tax savings.We’re now just 2 months away from the end of the year, and some of the tasks need to be done by 12/31/2018. As you know, there are a lot of holidays in that time frame too.First step is to call me to talk about your situation. We will talk about options and if your situation requires a retirement plan design expert. Those earning $50K or more above the limits will need a more sophisticated solution to sock away a larger amount and get under the limit.Taxes are never simple and this is not just taxes, but rather a combination of taxes and retirement plan design. Retirement plan design gets you to a low enough “QBI” to enjoy the 20% deduction. If your QBI lies under the limits then a retirement plan contribution is not required to enjoy the 20% Section 199A deduction.S Corp is a little more complex. In an S Corp, total income is split into wages and profits. In that case Section 199A applies to the profit “pass through” portion. However, the IRS is specifically looking for companies putting “too much” into the profit category and “not enough” into the wage category. (Your tax expert should know what amounts are OK.) Get too aggressive and you’re likely to get audited. It’s not worth it.I am not suggesting that I am a tax expert – you need to have a CPA/EA helping you with this strategy as well as an advisor and potentially a retirement plan design expert, often called a “TPA” – third party administrator. We recommend that you plan holistically – not just around avoiding taxes. This is about financial planning including diversification more than taxes.