New Sec. 199A - Qualified Business Income Deduction

On December 22, 2017 new legislation was enacted known as the Tax Cuts and Jobs Act.   Within this act new section 199A was added to the Internal Revenue Code.  This code section allows taxpayers, other than corporations, a deduction of 20% of qualified business income earned in a qualified trade or business, subject to certain limitations.
  • The deduction is limited based on W-2 wages or newly acquired qualified property.  The limitation applies to taxpayers (single) with $157,500 or more of taxable income or $315,000 or more of taxable income if married and filing jointly.
  • The deduction includes Qualified Income from Qualified trades or businessesQualified trades and businesses include all trades and businesses except the trade or business of performing services as an employee and "specified service" trades or businesses: those in the performance of law, accounting, financial services, and several others.
  • Income from "specified service" businesses is not excluded from qualified business income for taxpayers with taxable income under the income limitations noted above.
  • Qualifed business income  is the net amount of qualified items of income, gain, deduction, and loss with respect to a qualified trade or business that are effectively connected with the conduct of a business in the United States.  However, some types of income, including certain investment-related income, reasonable compensation paid to the taxpayer for services to the trade or business, and guaranteed payments, are excluded from qualified business income.
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