Section 199A Pass-Through Deduction

Overview

The 2017 Tax Cuts and Jobs Act (TCJA) affects the tax planning and income tax liability for many taxpayers. However, one of the more important—and complicated—changes established by the new TCJA is Section 199A, which concerns the type of businesses known as pass-through businesses. Pass-through businesses are those that do not pay corporate income tax at the entity level but pass income and expenses through to the owners.

The Section 199A Pass-Through Deduction is divided into three sections: First, calculation of the pass-through deduction for business owners whose taxable income does not exceed a threshold amount set by statute; second, calculation of the pass-through deduction for business owners whose taxable income is greater than the threshold; and, finally, calculation of the pass-through deduction for business owners whose taxable income is greater than the threshold and whose businesses are considered specified service trades or businesses (SSTBs). Through this course, we will cover these calculations and examine each of the business categories that are considered specified service trades or businesses and identify those businesses that might appear to be placed in those categories but would not be deemed SSTBs.

Learning Objectives

Upon completion of this course, you should be able to:

  • recognize how to compute the § 199A deduction for pass-through business owners whose taxable income is:
    • not in excess of the applicable threshold
    • in excess of the applicable threshold but not in excess of the sum of the threshold and phase-in range
    • in excess of the sum of the applicable threshold and phase-in range
  • determine W-2 wages and the unadjusted basis of qualified property immediately after its acquisition (UBIA)
  • pinpoint the definition of qualified business income (QBI), qualified REIT dividends and qualified publicly traded partnership (PTP) income and the special rules applicable to them
  • recognize the aggregation rules applicable to the § 199A deduction
  • identify the trades or businesses considered specified service trades or businesses (SSTBs) that may be ineligible for the pass-through deduction

Tax Year: 2022

Designed For

CPAs, EAs, and other tax-preparers who wish to better understand the recent developments in the Tax Cuts and Jobs Act, Provision 11011 Section 199A - Qualified Business Income Deduction

Prerequisites

Basic understanding of federal tax law concepts

Advanced Preparation

None

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