Self Study: Passthrough Business Deduction 2022

Overview

This course is available until April 30, 2025.

The Tax Cuts and Jobs Act (P.L. 115-97), enacted December 22, 2017, created, under 199A, a new deduction for up to 20% of qualified business income (QBI) from partnerships, limited liability companies (LLCs), S corporations, trusts, estates and sole proprietorships for tax years beginning after December 31, 2017. However, determining the 199A deduction amount and availability is a complex multi-step process that may phase out some or all of the deduction. In the face of this complexity, the text provides a selected overview of the essential components of this below-the-line deduction. Qualified business income, taxpayer’s taxable income, wage/capital limit, specified services trade or businesses and other vital components are defined and calculated. Their interaction is demonstrated and exampled.

Highlights

• Deduction amount
• Wage/capital limit
• Qualified business income
• Qualified trade or business
• Specify service trade or business
• De Minimis Regulatory Rule
• Domestic business

Objectives

• Recognize 199A's limited effective time period, its complex calculation process and the general exclusions, limits and restrictions applicable to the provision.
• Determine the 199A deduction amount, the type of W-2 wages used in calculating the wage/capital limit and specify how the limit impacts the amount and availability of the deduction.
• Identify qualified business income and loss, its basic components and the ability of a taxpayer to aggregate businesses in its determination.
• Recognize the specified services trade or business exclusion, the listed excluded services and the important exceptions provided by the regulatory de minimis rule. Identify a domestic trade or business.

Notice

Downloadable PDF