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

Author: James R. Hamill

CPE Credit:  2 hours for CPAs
2 hours Federal Tax Law Updates for EAs and OTRPs
2 hours Federal Tax Updates for CTEC

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 course 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 how to answer your clients' questions about this money-saving opportunity for Schedule C filers and those in certain LLCs, S corps and partnerships.

This course reflects tax law after enactment of TCJA.

Publication Date: February 2018

Designed For
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
  • Differentiate types of income
  • Describe reporting and income limitations related to the 20% deduction
  • Identify capital purchase price allocations
  • Differentiate how tests apply to a single rental property
  • Recognize ancillary issues with respect to the tax act
  • Identify correct statements regarding flow through entities
  • Identify and apply results of the TCJA
  • Identify the 20% deduction phase-out end for married filing jointly taxpayers
  • Describe unadjusted basis of depreciable property
  • Identify classes of capital assets increase the capital base and possibly the qualified business income limit
  • Identify the lowest deduction that can be taken by a service business
  • Recognize how non-QBI deductions can help increase the QBI deduction

Level
Update

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

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

Advance Preparation
None

Registration Options
Quantity
Fees
Regular Fee $99

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