Section 199A Qualified Business Income Under 2017 Tax Cuts and Jobs Act (Completed)

Significant Planning Opportunities to Maximize Deduction

Effective for the 2018 tax year Section 199A allows a 20% deduction for “qualified business income.” This deduction applies to any business income earned outside a C corporation, so it will affect schedule C filers, and income earned in a partnership or an S corporation.

The mechanics of the deduction are not that difficult, but the deduction either phases out or may be limited if taxable income exceeds a threshold amount. For service businesses the deduction can be lost when income reaches the end of the phase-out range. For non-service businesses the deduction may be limited based on the W-2 wages paid from the business or a combination of W-2 wages and unadjusted basis of property used in the business.

It may not be clear whether a business is a service business. It may also be possible to plan to maximize the deduction when the taxpayer is otherwise in the phase-out range. This session will discuss those issues, and many others, to allow you to properly advise clients. Join Jim Hamill, CPA, Ph.D., for a look at how this deduction works and answers to your clients' questions about this money-saving opportunity for Schedule C filers and those in certain LLCs, S corps and partnerships.

Who Should Attend
CPAs, EAs, tax preparers and other tax professionals with responsibility for advising clients with business income on their tax returns.

Topics Covered

• Computation of the Section 199A deduction
• Limits based on taxable income of the qualified business
• Limits based on the taxpayer's taxable income
• Phase-out computations for a service business
• Wage or wage/capital limitations on non-service businesses
• Planning to control taxable income
• Impact of Section 199A on purchase price allocations
• How to determine unadjusted basis of business assets
• What is a service business
• What is business income
• Reporting issues for flow through entities

Learning Objectives

• Compute the Section 199A deduction for taxpayers above the threshold income level and for other taxpayers
• Identify planning opportunities to maximize the deduction
• Define a service business as that term is used in Section 199A

Level
Update

Instructional Method
Group: Internet-based

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic understanding of federal income taxation for individuals and pass-through entities.

Advance Preparation
None