Question

1) How does property used in a qualified trade or business factor into the QBI deduction calculation under IRC Section 199A? What types of property are considered for the QBI deduction?

Answer 1

As per Section-199A of Internal Revenue Services, provides a deduction up to maximum of 20% of qualified business income for pass-through or non-corporate entities like sole proprietorship, partnership, S-corporation, trust, and estates. This deduction is introduced by Tax Cuts and Jobs Act for providing a tax relief to these entities.

If any property used in a qualified trade or business then it qualified business or trade then unadjusted basis immediately after acquisition of property by the qualified business or trade will be treated as part of qualified income for the purpose of computing the deduction under section-199 for acquisition of qualified property.

This deduction is available only to pass-through entities, non-corporate entities and covers all business or trade as also defined in Section-162. However, this deduction is not available for C-corporation, taxpayer involved in the Specified Service Trades or Businesses (SSTBs) like in the sector of accounting, law, health, consulting, and financial services etc., and any trade or business of providing services like an employee.