Thomson Reuters Checkpoint Catalyst has published an analysis of the new Section 199A qualified business income deduction for pass-through entities ushered in by the Tax Cuts and Jobs Act.
Section 199A permits non-corporate owners of sole proprietorships, S corporations, and partnerships a deduction of up to 20 percent of their net qualified business income from each qualified pass-through business, although there are restrictions on the amount that can be deducted by accounting and law firms. In addition, Section 199A allows taxpayers to deduct up to 20 percent of real estate investment trust dividends and publicly traded partnership income. That can be a significant tax benefit for many noncorporate business owners and could even rival the cut in the corporate tax rate to 21 percent.
Checkpoint Catalyst Topic #302, Qualified Business Income from Partnerships, S Corporations, LLCs, and Sole Proprietorships (IRC § 199A), explains the provision, the activities that are eligible for the deduction, the different limitations and prohibitions, along with areas where more guidance is needed from the IRS before the provision can be properly implemented.
“New Section 199A of the Code is a significant change in the way income earned through pass-through businesses is taxed,” said Salim Sunderji, managing director, Checkpoint, with the Tax & Accounting business of Thomson Reuters, in a statement. “This Topic provides tax advisers with step-by-step directions for computing a business owner’s tax liability and guidance on structuring taxpayer business arrangements to maximize federal income tax savings.”
The Checkpoint Catalyst Topic guides tax practitioners through the complicated new rules in the tax overhaul. It includes a number of examples, along with an interactive Qualified Business Income Deduction Worksheet that helps practitioners do the qualified business income calculation, as well as model different scenarios and compare the various outcomes. It provides explanations of the terms and values needed to do the calculation, while citing the relevant authorities.
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