Qualified Business Income Deduction Assessment

The new Internal Revenue Code Section 199A provides a 20 percent deduction of domestic qualified business income (QBI) from a partnership, S corporation or sole proprietorship to noncorporate taxpayers, i.e., individuals, trusts and estates. Not sure if you’re eligible? Let our step-by-step assessment guide you through this determination.
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Are you a noncorporate taxpayer, i.e., an individual, trust or estate?

YES

NO

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You are not eligible for a deduction under Internal Revenue Code Section 199A. 

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Do you have income that is effectively connected with the conduct of a trade or business within the United States or Puerto Rico?

YES

NO

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You are not eligible for a deduction under Internal Revenue Code Section 199A. 

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Do you have qualified business income (QBI)?

QBI includes the net amount of items of income, gain, deduction & loss with respect to any qualified trade or business, except: reasonable compensation, guaranteed payments, short-term & long-term capital gain or loss, dividend income, interest income, qualified real estate investment trust dividends or qualified publicly traded partnership income

YES

NO

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You are not eligible for a deduction under Internal Revenue Code Section 199A. 

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Are you a specified agricultural or horticultural co-op?

A specified agricultural or horticultural cooperative is an entity organized & operated on a cooperative basis that is significantly engaged in the marketing, manufacturing, production, growth or extraction of any agricultural or horticultural product, including fertilizer, diesel fuel & other supplies

YES

NO

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Your deduction, which is limited to 50 percent of W-2 wages allocable to domestic production gross receipts, is equal to 9 percent of the lesser of: (1) qualified production activities income (domestic production gross receipts less the cost of goods sold, losses & other expenses properly allocable to those receipts) OR (2) cooperative taxable income (taxable income determined before any deduction for patronage dividends, per-unit retain allocations & nonpatronage dividends)

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Is your taxable income greater than the full phaseout?

(For 2019: $210,700 for single taxpayers, $421,400 for married taxpayers filing jointly)

YES

NO

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Are you a specified service trade or business?

Click here for a summary if each specified service trade or business category.

YES

NO

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Is your taxable income less than the threshold?

(For 2019: $160,700 for single filers, $321,400 for married taxpayers filing jointly)

YES

NO

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You are not eligible for a deduction under Internal Revenue Code Section 199A

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You are eligible for a deduction under Internal Revenue Code Section 199A; however, your deduction may be limited. Contact your trusted BKD advisor for help determining the amount of your potential deduction

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You are eligible for a reduced deduction under Internal Revenue Code Section 199A. Contact your trusted BKD advisor for help determining the amount of your potential deduction. 

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You are eligible for a deduction under Internal Revenue Code Section 199A; however, your deduction may be limited. Contact your trusted BKD advisor for help determining the amount of your potential deduction

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Last Question

($207,500 for single taxpayers, $415,000 for married taxpayers filing jointly)

YES

NO