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NEW 20% DEDUCTION FOR QUALIFIED BUSINESS INCOME UNDER NEW TAX LAW


Written by: Marci Gietl, CPA

Under the new Tax Cuts and Jobs Act law (the Act), there is a significant new tax deduction taking effect in 2018 that may provide substantial tax benefit to individuals with “qualified business income” from a partnership, S corporation, LLC or sole proprietorship. Income from such entities is also referred to as “pass-through” income.

The deduction may be up to 20% of the “qualified business income” (QBI) from these entities. QBI is defined as the net amount of items of income, gain, deduction and loss with respect to the trade or business. The business must be conducted in the U.S. and specified investment-related items are not included [i.e., capital gains or losses, dividends and interest income (unless interest is properly allocable to the business)].

For taxpayers with income from “specified services” trades or businesses and total taxable income over certain levels depending on filing status, there are exclusions phased in that lead up to a level of complete disallowance of the deduction. These “specified services” trades or businesses include the performance of services in the fields of law, health, athletics, consulting, financial or brokerage services, or where the principal asset is the reputation or skill of one or more employees or owners.

Additionally for all taxpayers with incomes above established thresholds based on filing status, there’s a limitation on the deduction that’s tied to the wages of the entity or a combination of the wages and capital investment of the entity. The latter limit could be especially beneficial to real estate entities that have little to no wages but significant holdings.

The complexities of this new deduction are considerable, especially if your taxable income may be at or above the thresholds. If you’d like to learn more about this deduction and the potential impact on your tax situation, please contact us to discuss.

 
IMPORTANT TAX DATES TO REMEMBER


With the beginning of the new year, we want to remind you of important tax due dates and deadlines that are just around the corner. In addition to these dates please keep in mind that information provided to our firm for 1040 preparation on or after March 23th 2018 will receive an extension.

Here is a recap of important dates to keep in mind as 2018 progresses:

  • January 15, 2018 - 2017 4th quarter estimate payment
  • January 31, 2018 - All information forms (W2/1099) are due to recipients and must be filed with the government
  • March 15, 2018 - Form 1065 and 1120-S
  • March 23, 2018 - Deadline to have individual tax prep info to Becker and Rosen
  • April 17, 2018 - Form 1040, 1041, and 1120, unless extended
  • April 17, 2018 - 2018 1st quarter estimate payment
  • June 15, 2018 - 2018 2nd quarter estimate payment
  • September 17, 2018 - 2018 3rd quarter estimate payment
  • September 17, 2018 - Form 1120-S and 1065, if extended
  • October 1, 2018 - Form 1041, if extended
  • October 15, 2018 - Form 1040 and 1120, if extended
  • January 15, 2019 - 2018 4th quarter estimate payment
     
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Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

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Becker and Rosen CPAS, LLC
8008 Carondelet Ave., Ste. 214
Clayton, MO 63105

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