Section 199A Qualified Business Income

Author: James R. Hamill

Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2027 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card

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. IRS regulatory guidance provides the most detailed rules for how this deduction will work for affected taxpayers.

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.

The Treasury Inspector General has advised the IRS that many reported Section 199A deductions are not proper. The IG suggests that the IRS lower the threshold to examine claimed deductions and issue warnings about the need to comply with the rules.

Did the IRS clarify whether a business is a service business? This and more questions will be answered in this two-hour CPE course. 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.

It may also be possible to plan to maximize the deduction when the taxpayer is otherwise in the phase-out range. This course will discuss those issues, and many others, to allow you to properly advise clients.

Publication Date: December 2024

Designed For
Basic knowledge of passthrough entity taxation concepts.

Topics Covered

• General Provisions
• Trade or Business Definition
• Rental as a Business
• Service Business Defined
• Aggregation Options
• W-2 and UBIA Allocations

Learning Objectives

• Recognize the Section 199A deduction for taxpayers above the threshold income level and for other taxpayers
• Identify planning opportunities to maximize the deduction
• Describe a service business as that term is used in Section 199A
• Identify and apply IRS final regulatory guidance when working with taxpayers on the QBID
• Recognize types of ineligible taxpayers
• Identify correct statements regarding qualified business income
• Identify how to differentiate statements with respect to aggregation
• Describe compensation for services or capital
• Recognize which type of interest income is included in qualified business income for purposes of the §199A deduction
• Identify how to differentiate aggregation/segregation
• Identify the threshold amount for QBID filers

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
Basic knowledge of passthrough entity taxation concepts.

Advance Preparation
None