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New Regulations on 20 Percent Deduction for Pass-Through Businesses

08/09/2018

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IRS issues proposed regulations on new 20 percent deduction for pass-through businesses (IR-2018-162)

The IRS issued proposed regulations on August 8, 2018, for a new provision allowing many owners of sole proprietorships, partnerships, trusts, and S corporations to deduct 20 percent of their qualified business income. 

The new deduction, referred to as the Section 199A deduction or the deduction for qualified business income, was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after December 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year. 

In addition, Notice 2018-64, also issued Wednesday, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction. Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register. https://www.irs.gov/newsroom/irs-issues-proposed-regulations-on-new-20-percent-deduction-for-passthrough-businesses

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LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.