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Do I Qualify for a Qualified Business Deduction Under §199A?

Businessman takes bag of money from another businessman.

What is a Qualified Business Income Deduction?

Section 199A of the Internal Revenue Code (“IRC”) provides business owners an income deduction when reporting their qualified trade or business’ income, also known as a qualified business income (“QBI”).

The following trade or business income’s that qualify for this deduction are any incomes reported under “Schedule C” sole proprietorships, business and rentals, “K-1” S corporations, partnerships, trusts or estates, “Schedule E” real estate investors, and “Schedule F” farmers and ranchers.

The QBI component of the deduction equals 20% of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate. Depending on the taxpayer’s taxable income, the QBI component is subject to multiple limitations that vary with the type of trade or business.

How Do I Calculate My Qualified Business Income Deduction?

A taxpayer is never going to be able to take a deduction greater than 20% of QBI. This deduction will be less than 20% of QBI if the taxpayer is single and makes more than $157,500 or is married, filed jointly, and makes more than $315,000 and entering the upper threshold of $415,000. Taxpayers may need to further reduce their deduction by an overall limitation.

If a taxpayer has more than one pass-through entity with QBI, these amounts must be combined. A taxpayer determines the combined QBID by adding together the allowed QBID amount for each respective entity. If there is only one pass-through entity, then the QBID for the one entity is the combined QBID.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.
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