Seven answers to your Section 199A questions

The Tax Cuts and Jobs Act added a new tax code Section 199A that gives business owners of pass-through businesses a possible 20-percent tax deduction on business income.

Sounds good, And it is good. But as you can imagine, some important questions arise that need definitive answers.

In this issue of the Tax Reduction Letter we’re going to ask the questions that our readers ask and answer them very briefly. For the complete answers you really need, don’t miss this chance to read my new article titled Tax Tips: Seven Answers to Your Section 199A Questions.

Seven quick answers to your Section 199A questions

Questions #1: Real estate agents

Are real estate agents and brokers an out-of-favor specified service trade or business for purposes of Section 199A?

Short Answer. No.

For a complete answer, read the new article.

Question #2: Shareholder Wages

Do my S corporation shareholder wages count as wages paid by the S corporation for purposes of the 50-percent Section 199A wage limitation?

Short Answer. Yes.

For a complete answer, read the new article.

Question #3: Retirement Contributions

Will my allowable SEP/SIMPLE/401(k) contribution as a Schedule C taxpayer be based only on Schedule C net earnings or do I first subtract the Section 199A deduction?

Short Answer. You’ll continue to use Schedule C net earnings with no adjustment for Section 199A.

For a complete answer, read the new article.

Question #4: Bonus Depreciation and Section 179

Is QBI reduced by either bonus depreciation or Section 179 expensing?

Short Answer. Yes, to both.

For a complete answer, read the new article.

Question #5: Shareholder Loan Interest

I took out a loan to buy S corporation stock. The interest is deductible on my Schedule E. Does the interest reduce my QBI?

Short Answer. It is a full deduction from QBI in most circumstances.

For a complete answer, read the new article.

Question #6: No Section 199A Deduction

The out-of-favor specified service trade or business does not qualify for the Section 199A deduction, correct?