Qualified Business Income Deduction

Qualified Business Income Deduction under 199A.

This is also known as the passthrough deduction or sometimes the Section 199A deduction. 

Who is eligible to take the qualified business income deduction QBID? 

Taxpayers; other than C corporations, that includes individuals in certain trust and estate who have qualified business income from tax years ending after December 31, 2017 and that income comes from a qualified trade or business or a qualified publicly-traded partnership PTP; Section 199A real estate investment trust dividends [REIT dividends or R-E-I-T dividend.] 

Partnerships and S corporations don't determine the deduction at the entity level, but they will passthrough the information necessary for their partners and shareholders can claim the deduction on their tax return. 

Individuals and certain trust and estate may be entitled to a qualified business income deduction

The deduction is limited to the lesser of these amounts or taxable income less net capital gain. 

What is qualified business income QBI. 

Basically, QBI is the net amount of qualified items of income, gain deduction and loss for many qualified trade or business. 

Only those items that are included in taxable income are counted. So, for example, if you have a current year business loss, or losses, that are limited by the passive activity loss limitations, only the losses from the businesses that are allowed to be claimed on the current years' Form 1040 would be included in the QBI computation. In addition, the items must be effectively connected with the United States trade or business.

Now, the businesses that may generate QBI would include those conducted through sole proprietorships, sub-chapter S corporations, partnerships, trusts and estates. 

But remember, that income earned through a C corporation is not eligible for the deduction.

Source irs.gov

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