The highly anticipated regulations regarding the deduction for
up to 20% of qualified business income (QBI) have been proposed by
the IRS. The addition of Section 199A, which governs the
pass-through deduction, was a major component of the new tax law
that was passed last December.
These new regulations are only proposed, so they may change
before a final version is adopted. However, you can rely on them
until final regulations are issued.
The 199A deduction
The proposed regulations provide operational rules for
calculating the QBI deductions. They describe the mechanics of the
deduction, including the phaseout rules that apply over the
Threshold Amount.
For tax years beginning on or after January 1, 2018 and on or
before December 31, 2025, the 199A deduction can be up to 20% of
QBI for the owners of pass-through entities (PTE). The deduction
also applies to certain income from real estate investment trusts
(REITs), publically traded partnerships (PTP) and
