The Tax Cuts and Jobs Act (P.L. 115-97), enacted Dec. 22, 2017, created, under 199A, a new deduction for up to 20% of qualified business income (QBI) from partnerships, limited liability companies (LLCs), S corporations, trusts, estates, and sole proprietorships for tax years beginning after Dec. 31, 2017. However, determining the 199A deduction amount and availability is a very complex multi-step process that may phase out some or all the deduction. In the face of this complexity, the text provides a selected overview of the basic components of this below-the-line deduction. Qualified business income, taxpayer’s taxable income, wage/capital limit, specified services trade or businesses, and other key components are not only defined and calculated but their interaction is demonstrated and exampled. ASSIGNMENT
At the start of the materials, participants should identify the following topics for study:
* Deduction amount
* Wage/capital limit
* Qualified business income
* Qualified trade or business
* Specify service trade or business
* De minimis regulatory rule
* Domestic business
Learning Objectives
After reading the materials, participants will be able to:
1. Recognize 199A’s limited effective time period, its complex calculation process and the general exclusions, limits, and restrictions applicable to the provision.
2. Determine the 199A deduction amount, the type of W-2 wages used in calculating the wage/capital limit and specify how the limit impacts the amount and availability of the deduction.
3. Identify qualified business income and loss, its basic components and the ability of a taxpayer to aggregate businesses in its determination.
4. Recognize the specified services trade or business exclusion, the listed excluded services and the important exceptions provided by the regulatory de minimis rule. Identify a domestic trade or business.
