20% Pass Thru Deduction

[Terry D EA]

I have been looking at this bill extensively and from various resources and have not be able to determine when this becomes effective. Anyone have an answer here? If so, could you cite a reference please.

[Margaret CPA in OH]

The NATP summary lists 'the most notable changes taking effect after December 31, 2017' so I interpret that as tax year 2018.  " Pass-through Businesses Non-corporate taxpayers, including trusts or estate. who have domestic qualified business income (QBI) from a partnership, S corporation, or sole proprietorship are allowed to deduct 20% of business-related income, subject to certain wage limits and exceptions.  The remaining income is subject to normal individual rates.

The 20% deduction in not allowed in computing adjusted gross income (AGI), but rather is allowed as a deduction reducing taxable income.  It does not reduce income subject to SE tax.  The deduction is also not allowed for businesses offering certain personal services........"

Does this answer your question?

[Terry D EA]

Thanks Margaret but I'm not sure. I did fully understand the details you listed and do see that the most notable changes take place after December 31. 2017 which I can only assume is the same for the 20% deduction and it appears it applies to income from 2018 going forward.

[JimTaxes]

regarding the application of this to certain personal services.. the reply was truncated... correct me if i am wrong but i think 

The deduction would also be disallowed for specified service trades or businesses with income above a threshold.

if accounting/tax practice grosses 250,000 this cut should but ok right?

 

[BulldogTom]

I am assuming that the deduction will apply to the individual's 2018 1040 income tax return, and any QBI that is reportable on that return would be eligible for the deduction.  

I think what you might be asking is if all the QBI flowing through from the K-1 of a business with a fiscal year is eligible for the deduction, or only the portion earned after 12/31/2017?  I have not heard anything that says we would have to segregate the income between the years it was earned in.  That may have to be addressed in Treasury regulations.

Tom
Modesto, CA

[DANRVAN]

On ‎12‎/‎26‎/‎2017 at 3:14 PM, BulldogTom said:

I am assuming that the deduction will apply to the individual's 2018 1040 income tax return, and any QBI that is reportable on that return would be eligible for the deduction.  

 

That appears to be the case under section 199A(c) as added by the tax reform act of 2017.