$157,500 and $315,000 Question

[kathyc2]

This can produce some crazy results. Take a single self employed person without employees that rents instead of owning home so they take standard deduction.

At 170K of QBI less 12K standard deduction, they will get essentially the full 20% or 34K deduction. That makes taxable income 124K and FIT is 24,049.

If instead of 170K, the QBI income is 220K. After 12K standard deduction, they are totally phased out so no 199A deduction. Their taxable income is 208K and tax is 48,489.

Adding 50K of income increases FIT by 24,440 or an effective rate of 49% on the additional 50K of income.

[New York Enrolled Agent]

I agree.


To answer Kram's other question, yes, if "taxable income" is under those amounts, the 20% reduction is valid regardless of ccupation, employee status, and tangible assets

TGB, Kathy and others who are following the progress of the new §199A.

What's your take on any deduction for rental activities? Typically, rental activities have not been considered as a §162 trade or business. However, some (certainly not all) commentators have suggested that the 2.5% asset limitation was written to include rental activities.

One post on a message board had an explanation of the section written by a CPA firm in CO with an example showing an individual taxpayer with three rental properties with net incomes of $20K, $5K and ($8k). The example aggregated the three to $17K and said there would be a 20% deduction of the $17K. I realize there are no regulations yet and we are still in the "learning curve" but what's your opinion on this? Do you think that the 2.5% addition to the final bill allows rental activities to get the deduction?

[TaxGuyBill]

They went against the norm and made it TAXABLE income rather than AGI. They did at least say that the 199 deduction does not come into play for the deduction so we don't have a circular calculation. It should be noted that the 157.5/315 is not absolute, but where phaseout starts.

I agree.


To answer Kram's other question, yes, if "taxable income" is under those amounts, the 20% reduction is valid regardless of ccupation, employee status, and tangible assets

[kathyc2]

First do the amounts $157,500 and $315,000 in the new law concerning the business deduction refer to business income, AGI or Taxable Income?
second, if a taxpayer's income is below the applicable threshold, does he or she then get a 20% deduction regardless of the occupation, employee status, and tangible assets?

They went against the norm and made it TAXABLE income rather than AGI. They did at least say that the 199 deduction does not come into play for the deduction so we don't have a circular calculation. It should be noted that the 157.5/315 is not absolute, but where phaseout starts.

[Kram BergGold]

First do the amounts $157,500 and $315,000 in the new law concerning the business deduction refer to business income, AGI or Taxable Income?
second, if a taxpayer's income is below the applicable threshold, does he or she then get a 20% deduction regardless of the occupation, employee status, and tangible assets?