ABSTRACT

Section 199A Deduction: How it Works and Illustrative Examples [June 10, 2020]   [open pdf - 1MB]

From the Summary: "Congress made numerous changes to the federal tax code for individuals and corporate and noncorporate businesses in December 2017, as part of P.L. 115-97 (referred to in this report as the 2017 tax revision but also known as the Tax Cuts and Jobs Act). At the core of the law was a permanent cut in the corporate income tax rate from a top rate of 35% to a flat rate of 21%. During the congressional debate over the 2017 tax revision, pass-through business owners sought tax relief comparable to any reduction in corporate tax rates. Heeding this request, Congress added a new deduction under Section 199A of the federal tax code. The deduction allows pass-through business owners to deduct up to 20% of their qualified business income (QBI) in determining their personal tax liability. This reduces effective tax rates for pass-through business profits by up to 20%. Like most of the changes in the individual income tax in P.L. 115-97, the new Section 199A deduction is temporary: it is available from 2018 to 2025. In general, Section 199A allows individuals, trusts, and estates with pass-through business income to deduct up to 20% of their QBI from their taxable income."

Report Number:
CRS Report for Congress, R46402
Author:
Publisher:
Date:
2020-06-10
Copyright:
Public Domain
Retrieved From:
Congressional Research Service: https://crsreports.congress.gov/
Format:
pdf
Media Type:
application/pdf
URL:
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