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1040 form handheldFinal regulations and related guidance have been to implement the qualified business income deduction (section 199A deduction). Released by the Treasury Department and the Internal Revenue Service issued the deduction is available for tax years beginning after Dec. 31, 2017.

Created by the 2017 Tax Cuts and Jobs Act, the QBI deduction enables many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income. Eligible taxpayers can do the same for real estate investment trust dividends and publicly traded partnership income.  

Guidance includes the following.

A set of regulations, finalizing proposed regulations issued last summer along with  proposed regulations providing guidance on aspects of  deduction, including REIT dividends received by regulated investment companies.

*A revenue procedure providing guidance on determining W-2 wages for QBI deduction purposes.

*A notice on a proposed revenue procedure providing a safe harbor for certain real estate enterprises that may be treated as a trade or business for purposes of the QBI deduction.

*Included in Notice 2019-07, the proposed revenue procedure, allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met.

The deduction is generally available to taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with higher incomes can still qualify for the deduction, subject to limitations, such as the type of trade or business, the amount of W-2 wages paid in the trade or business and the unadjusted basis immediately after acquisition of qualified property. 

The deduction is not available for wage income or for business income earned by a C corporation.

Last modified on Sunday, 20 January 2019
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