August 13, 2018

Attention Business Owners – IRS Issues 199A Proposed Regulations

young businessman calculates taxes at desk in office


On August 8, 2018, the IRS issued proposed regulations for the new Section 199A.  199A allows many sole proprietorships, partnerships, trusts, and S corporations to deduct 20% of their qualified business income.

Qualified business income includes domestic income from a trade or business.  However, wages, capital gains, interest income, and dividend income do not constitute qualified business income.

Eligible business owners can claim the 199A deduction for the first time with respect to their 2018 tax year.

There are phase-out provisions starting at $315,000 for joint returns and $157,500 for all other tax returns.  If you are above the phase-out amount, your deduction may be limited.  The limitations are further detailed in the proposed regulations.

There are even stricter phase-out provisions for certain service professionals.  Service professionals cannot deduct any amount if they are wholly above the phase-out limitation ($415,000 joint returns).

Taxpayers may rely on the proposed regulations in the meantime until final regulations are published in the Federal Register.

If you have any questions about the new tax laws or the proposed regulations, please feel free to reach out to a tax lawyer at Mendes Weed, LLP.

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