{"id":183,"date":"2019-01-29T01:13:39","date_gmt":"2019-01-29T01:13:39","guid":{"rendered":"http:\/\/www.roecpa.com\/blog\/?p=183"},"modified":"2019-01-28T03:39:42","modified_gmt":"2019-01-28T03:39:42","slug":"what-is-qualified-business-income-qbi-and-why-does-it-matter","status":"publish","type":"post","link":"https:\/\/www.roecpa.com\/blog\/what-is-qualified-business-income-qbi-and-why-does-it-matter\/","title":{"rendered":"What is Qualified Business Income (QBI) and Why Does It Matter?"},"content":{"rendered":"<p>The new Section 199A provides self-employed taxpayers the ability to deduct up to 20% of their Qualified Business Income (QBI) on their tax returns. In general, QBI is net income that is received from a Qualified Trade or Business. However, there are some exclusions, the most common of which are capital gains, dividend and interest income. Additionally, any guaranteed payments or &#8220;reasonable compensation&#8221; paid to owners is excluded.<\/p>\n<p><strong>How Does the New Tax Law Define QBI?<\/strong><\/p>\n<p>Section 199A(c) defines QBI as, &#8220;the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.&#8221; The section further states that qualified REIT dividends, qualified cooperative dividends, and qualified publicly traded partnership income are specifically excluded from the definition of QBI.<\/p>\n<p><strong>What are &#8220;Qualified Items of Income, Gain, Deduction, and Loss?&#8221;<\/strong><\/p>\n<p>Qualified items of income, gain, deduction, and loss are defined as items that are connected with a trade or business that is operated in the United States and are generally included or allowed when a business determines its taxable income for the year. However, there are items that are specifically excluded:<\/p>\n<ul>\n<li>Short-term capital gains and losses<\/li>\n<li>Long-term capital gains and losses<\/li>\n<li>Dividends<\/li>\n<li>Interest income<\/li>\n<li>Foreign personal holding income<\/li>\n<li>Income from an annuity if not received in connection with the business<\/li>\n<\/ul>\n<p>These items may not be income or deductions for purposes of calculating QBI. A basic method of viewing QBI is &#8220;ordinary&#8221; income less &#8220;ordinary&#8221; expenses. In other words, investment gains and expenses are not QBI for Section 199A purposes.<\/p>\n<p><strong>Reasonable Compensation and Guaranteed Payments<\/strong><\/p>\n<p>In addition to the items discussed above, any reasonable compensation paid to the taxpayer by the business, including guaranteed payments, is not QBI. For example, if you receive $50,000 in wages from an LLC that you own and your share of income at the end of the year is $100,000 \u2013 only the $100,000 would be considered QBI.<\/p>\n<p>Roe CPA, P.C. offers a variety of <a href=\"https:\/\/www.roecpa.com\/income-tax-preparation-services.htm\" target=\"_blank\">tax preparation<\/a> and <a href=\"https:\/\/www.roecpa.com\/tax-planning-services.htm\" target=\"_blank\">planning <\/a>services to both businesses and individuals. Conscientious tax planning throughout the year can save you money and make tax time easier. Call us at\u00a0<strong>404-504-7051<\/strong>\u00a0and request a\u00a0<a href=\"https:\/\/www.roecpa.com\/consultation.htm\">free initial consultation<\/a>\u00a0to learn more.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new Section 199A provides self-employed taxpayers the ability to deduct up to 20% of their Qualified Business Income (QBI) on their tax returns. In general, QBI is net income that is received from a Qualified Trade or Business. However, there are some exclusions, the most common of which are capital gains, dividend and interest [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[3],"tags":[],"class_list":{"0":"post-183","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-tax","7":"entry"},"_links":{"self":[{"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/posts\/183","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/comments?post=183"}],"version-history":[{"count":1,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/posts\/183\/revisions"}],"predecessor-version":[{"id":184,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/posts\/183\/revisions\/184"}],"wp:attachment":[{"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/media?parent=183"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/categories?post=183"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.roecpa.com\/blog\/wp-json\/wp\/v2\/tags?post=183"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}