The 2017 tax reform act (the Act) added new Section 199A, which provides many noncorporate taxpayers a 20% deduction for qualified business income (QBI) from a trade or business operated directly or through a passthrough entity. In effect, Section 199A may reduce the top rate on qualifying income from 37% to 29.6% (i.e., 80% of 37%).
The IRS and Treasury recently published proposed regulations implementing Section 199A. PwC on October 10 hosted a webcast featuring PwC specialists who discussed in depth several issues arising out of those regulations. This Insight highlights those discussions. Watch the webcast replay and register for future webcasts in PwC’s Tax Reform Readiness series, which addresses other areas affected by tax reform.
The next webcast — Tax reform readiness: Deeper dive on bonus depreciation — will take place on Wednesday, October 17, from 2:00 PM - 3:00 PM (EDT).
Taxpayers should plan carefully in the initial year in which the Section 199A deduction applies before choosing a method for allocating income and expenses between each trade or business and between QBI and non-QBI activities, and in deciding whether to make available elections, such as to aggregate or not aggregate trades or businesses (if permitted). These allocations and elections must be applied consistently from year to year.