The owners of pass-through businesses like sole proprietors, partnerships, S corporations and some real estate investors may now qualify for a deduction equal to 20% of qualified business income (QBI). If you have $100,000 of QBI, for example, you potentially get up to a $20,000 deduction. This also applies to Schedule C sole-proprietors.
The Section 199A QBI deduction gets limited in a couple of situations. Not every pass-through entity gets to use the Section 199A QBI deduction. For example this law disqualifies “specified service trades and businesses”. This includes most of the traditional white-collar professions (medicine, law, accounting, actuarial science, financial services and consulting). As well as performing artists and athletics unless personal taxable income is below applicable thresholds.
Another limitation applies if you’re single and earn more than $160,700 or you’re married and earn more than $321,400. However, if you are below these income limitations then the “specified service trades and businesses” limitation mentioned above does not apply. These rules and the qualifications are tricky…call me if you have income from a sole proprietorship, partnership, S Corporation or rental income to see if you qualify..