Question

The deduction for qualified business income received a lot of praise and criticism in the press from the time it was introduced in November 2017 to the present. Find reliable articles that explain at least two arguments for and against the QBI deduction. Explain whether you agree with these positions and why.

please provide: source link

Answer 1

The new 20 percent deduction for pass-through businesses sounds almost too good to be true. That brand new section of the tax code is called the qualified business income deduction. It allows qualifying owners of sole proprietorships, S corporations, and partnerships to deduct 20 percent of their business income from taxable income.

As a result of the 20 percent deduction and slightly lower tax rates, the effective top tax rate on those business’ incomes goes from 40.8 percent under 2017 tax law to 29.6 percent under the new law.

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What other limitations are there?

If you own shares in a business and you receive income, your 20 percent deduction may be subject to other limitations. However, those limitations also only kick in when you make over $157,000 as a Single filer or $315,000 if you’re married filing jointly. Additionally, the deduction is limited by the amount of W-2 wages paid by the business and the unadjusted basis of any qualifying property held by the business after acquiring it.

There are also limitations designed to keep you from taking a deduction on capital gains or investment income, which is already taxed at a lower rate.

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source : https://blog.taxact.com/qualified-business-income-deduction/

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Criticism

In my simple world, there would be one tax rate applied to all businesses, regardless of how their results are reported to the IRS. For a non-incorporated sole-proprietor, that might be on Schedule C of their personal income tax return. For “pass-through entities” such as partnerships and sub-S returns, the income is still passed through to the owner’s personal income tax return. All of the above are now affected by the “wonderful” Section 199A process

Source: https://www.nevadaappeal.com/news/opinion/kelly-j-bullis-computing-new-tax-laws-business-deduction/

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the theme of the Act was that people with income from owning businesses should not have to pay as much as people with income from working. Hence the lower corporate tax rates and the 20% deduction for qualified business income. There was an interesting wrinkle with the QBI.

A lot of people who own businesses where they practice professions that require quite a bit of education, like physicians and lawyers, or even something pretty lightweight like accounting don’t get the QBI benefit

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