The IRS provided long-awaited answers to questions on Section 199A, created by the Tax Cuts and Jobs Act, which allows owners of sole proprietorships, partnerships, trusts and S corporations to deduct 20 percent of their qualified business income (QBI).
For tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, taxpayers other than corporations are entitled to deduct 20 percent of QBI earned in a qualified trade or business. To ensure the 20 percent deduction in not taken against income taxed at preferential rates, limitations have been set.
Although intended to benefit business owners, the new provision has raised questions and concerns. The recent guidance has provided clarity on many issues in question.