If you’re wondering whether or not your business is eligible for the qualified business income deduction (QBI) under section 199A, we may have the answers you’ve been searching for. As of January 18, 2019, the Internal Revenue Service (IRS) issued final regulations regarding the section 199A QBI.
C&D is here to help guide you through the recent updates and find you the answers you need.
What is the Qualified Business Income Deduction?
A lot of times, our clients come to us searching for what all of this tax jargon means for their wallet. When it comes to the Section 199A qualified business income (QBI) deduction, it’s no different.
The qualified business income deduction under section 199A pertains to an individual’s income from sole proprietorships, partnerships, and S corporations with some trusts and estates also able to take advantage of the deduction. After enacting the 2017 Tax Cuts and Jobs Act, it now allows non-corporate taxpayers that fall under these qualifications to deduct up to 20% of their net income from the fiscal year.
As long as your organization is not a corporate entity, then you may be eligible for this tax cut. It’s important to note that the income also must be effectively connected with a U.S. trade or business. There are also limitations on specified service trades or businesses (SSTB) and overall income that factor into the potential deduction.
Do You Qualify After the New Regulations?
Now, you may be wondering whether or not you’re eligible for the qualified business income deduction and the January IRS regulations clarified some of these rules.
What’s most important to note is that the regulations shed some light on the most recent questions commenters were providing to the IRS. Here are some key takeaways:
- Clarification of how a specified service trade or business (SSTB) is defined.
- Sec. 199A deduction does not reduce net earnings from self-employment.
- Taxpayers with multiple trades or businesses will have losses netted with income before the application of limitations for individuals over the threshold amount.
- The IRS intends to issue regulations to agricultural and horticultural cooperatives after further research.
- Individuals who earn more than $210,700, and married couples earning more than $421,000 may be limited in their deduction.
We should note that this is not the full list of regulations surrounding Sec. 199A. There are many different factors to consider when determining whether or not you qualify for the QBI deduction. Navigating these regulations with your trusted tax professional is essential.
We recommend contacting a C&D tax professional to review the QBI regulations and how they pertain to you. The extensive set of regulations may be the difference between you achieving the tax reprieve you deserve.