Eligible taxpayers can claim the deduction for the first time on their 2018 federal income tax returns. It created by the Tax Cuts and Jobs Act.

It is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. The deduction is generally equal to the lesser of 20 percent of a taxpayer’s qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.

Taxpayers with annual income above $157,500/$315,000 taxable income thresholds may find their deductions are limited. Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

The IRS also published Notice 2018-64, which provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction

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