Last month the IRS issued final 199A Regulations, implementing the qualified business income deduction (QBID), created by the 2017 Tax Cuts and Jobs Act (also known as 2017 tax reform). The deduction can be claimed by eligible taxpayers for the first time on their 2018 Form 1040.
According to the IRS, “Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity.” There are two components to the deduction:
- The QBID allows eligible owners of partnerships, S corporations, sole proprietorships, trusts, and estates to deduct up to 20% of their qualified business income.
- Eligible taxpayers can also deduct up to 20% of their qualified real estate investment trust dividends and publicly traded partnership income.
There is definitely more to the QBID and a lot of confusion surrounding tax reform, so the IRS has provided an FAQ to help answer basic questions. If you’re looking for more information, the Journal of Accountancy published an article on January 22, outlining QBID regulations and other guidance issued.