U.S. 199A Qualified Business Income Deduction Introduction
Many individuals, including owners of businesses operated through sole proprietorships, partnerships, S corporations, trusts and estates may be eligible for a qualified business income deduction, also called the section 199A deduction, for years beginning after December 31.
The deduction allows them to deduct up to 20% of their qualified business income (QBI), plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned by a C corporation or by providing services as an employee is not eligible for the deduction.
The deduction has two components.
(1) The type of trade or business,
(2) The amount of W-2 wages paid by the qualified trade or business, and
(3) The unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business.
These limitations do not apply to taxpayers with taxable income at or below a certain threshold. For 2019, the threshold amount is $321,400 for a married couple filing a joint return, and $160,700 for all other taxpayers.
The overall deduction is limited to the lesser of the QBI component plus the REIT/PTP component or 20% of the taxable income minus net capital gain. The deduction is available regardless of whether an individual itemizes their deductions on Schedule A or takes the standard deduction.
QBI does not include any of the following: