Every entrepreneur is supposed to bear some tax deduction for running its business. These deductions are not fixed but keep on changing with every financial year. Section 199a deduction is completely different from the other deductions and is added to QuickBooks. In 2017 when passed law for The Tax Cuts and Job Acts (TCJA) to reform the policy of tax, section 199A come into existence. 

In this article we tried to highlight what actually Section 199a deduction is and what are its specifications. Let us discuss first about how it works in detail.

Section 199A deduction

Section 199A deduction is the deduction on qualified domestic business income excluding specified service business income. A domestic business of different types can avail benefits of deductions from taxes on their business income. For instance, 20% of public traded income along with approximately 20% of QuickBooks business income and real estate investment trust can be deducted from the total QuickBooks Business income. There is a limit of deduction; only 20% of taxable income can be deducted only after considering net capital gain. If you are not from accounts background, you must be curious to know what net capital gain is. When capital losses are deducted from capital gains, we get net capital gain provided capital gain must be more than capital losses. 

But one thing is to be noted that every body is not required to qualify for the deductions. There is a slab and it depends totally on the limits of your business and income. For instance, if your taxable income is not more than $315000 then a joint return is needed to be filed. And if taxable income is not more than $157500 for the current financial year than single return is to be filed. Also joint return is required to be file in case the taxable income is between $315000 to $ 415000 and between $ 157500 to $ 207500. Section 199A deduction is mandatory to avail for the businesses of sole proprietorship, partnership, trust and s corporations, if their business income qualifies.

Key Indicators applicable to Section 199a deduction in QuickBooks

It is always advisable to consult your professional accountant to know about Section 199a deduction in QuickBooks. Seeking advice from professional consultantalways helps you understand the impacts of section 199a deduction in your business. However we have discussed below some key indicators applicable to section 199a deduction in QuickBooks.

  • Applicable to additional business income: Section 199a deduction is applicable in case you have additional qualified incomefrom real estate investment trust dividends, qualified dividends from agriculture and horticulture cooperatives and from partnerships that are traded publicly. This deduction is not applicable to entire entity but only to qualified business income. 
  • No benefit for specified service trades and businesses

Section 199a deduction in QuickBooks is not applicable for those who are having businesses come under the term specified service trades and businesses. Thus it is clear that if business is qualified for SSTB, than no advantage of deduction shall be given. However only income generated through activities of SSTB for example consulting is exceptional to it.

  • Deduction as single platform for multiple business income.

In QuickBooks income generated through multi platforms are accounted at single platform and is considered to be as total business income. It simplifies the process of calculating deduction on all business income at one shot at the same time reducing times and efforts also. You are not required to calculate the amount of deduction on each business income separately.

  • Rental income is also entitled to avail section 199a deduction.

Earlier it was a topic of debate whether to include rental income in the list of incomes that can avail section 199a deduction.  But now it is officially declared that any rental income generated from real estate tangible property is entitled to avail the benefit of section 199a deduction.

  • W 2 wages and depreciable assets required for High Tax Payers

Those tax payers who are generally pay more taxes are supposed to calculate their total taxable income by reducing the total W2 wages they had paid and by reducing the amount on depreciation on fixed assets. However there is a criteria of deciding section 199a deduction. The deduction amount is to be roughly calculated and checked if it should not be more than 50% of W 2 wages or sum of 25% of W 2 wages

  • Deductions not for service businesses

If you are a service provider, performer, athlete or a consultant then you are excluded from getting the benefit of section 199a deduction in QuickBooks.

  • It covers only income from domestic business.

If you are having income from foreign countries then your business income is not qualified for section 199a deduction. Only income from domestic businesses within the country is qualified for section 199a deduction.

In last we suggest you to take professional help in case you stuck in calculating Section 199a deductions in QuickBooks.

Share this Link:
Call for Help & Support