New IRS guidance on QBI deductions

November 10, 2019

On its website, the IRS has included new guidance that explains how tax-exempt trusts can claim a qualified business income (QBI) deduction, labeled as “Trust – Qualified Business Income Deduction under Section 199A.”

The Tax Cuts and Jobs Act, P.L. 115-97, allows eligible taxpayers to claim a new business deduction computed in one of two ways: the lesser of 20% of QBI plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income, or 20% of taxable income minus net capital gains.

Per the IRS guidance, the taxable income used for calculating the QBI deduction is the amount reported on Form 990-T, line 36, “Total of Unrelated Business Income Before Specific Deduction.”

A new Form 8995, “Qualified Business Income Deduction Simplified Computation,” will be used with the 2019 tax return for reporting the computation of the Sec. 199A deduction and attached to the Form 990-T.

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