IRS Issues FAQs for Qualified Business Income Deduction

The IRS has published on its website a list of frequently asked questions relating to the qualified business income (QBI) deduction. The deduction was created by the 2017 Tax Cuts and Jobs Act, under Internal Revenue Code Section 199A. It permits noncorporate taxpayers to deduct up to 20 percent of QBI, plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income. QBI is the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business. Individuals and some trusts and estates with QBI, qualified real estate investment trust dividends, or qualified publicly traded partnership income may be eligible for the deduction.

The IRS explains in the FAQs that deductible contributions that the taxpayer makes to a qualified retirement plan, savings incentive match plan for employees of small employers (SIMPLE) IRA plan, or simplified employee pension (SEP) plan are accounted for when determining QBI.