The IRS has released final regulations and additional guidance
on the QBI deduction just before the first tax season where
taxpayers can claim the deduction. The new guidance provides some
clarity on who qualifies for the QBI deduction and how to calculate
the deduction amount.
QBI deduction in action
The QBI deduction is up to 20% of QBI received from a PTE,
subject to certain limitations. QBI is equal to the net amount of
income, gains, deductions and losses, but excludes reasonable
compensation, investment items and guaranteed payments to
partners.
QBI is determined for each qualified business and the net
amounts are aggregated. If the net amount is below zero, it is
treated as a loss for the following year, reducing that year's
QBI deduction. The deduction can never be more than 20% of a
taxpayer's taxable income (excluding income subject to capital
gains rates).
