EDITORS COMMENTARY

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New Qualified Business Income Deduction

People have noticed a line (#9) of “Qualified Business Income Deduction” on 2nd page of new Form 1040 for 2018 Individual Tax Return. Do you know what this new deduction for? In the previous month newsletter we talked about new 20% pass-through tax deduction for business owners. It is also known as Section 199A deduction. The Tax Cuts and Jobs Act created a brand new tax deduction for owners of pass-through businesses. This deduction begins for 2018 and is scheduled to last through 2025. Since the eligibilities with this Sec. 199A deduction, it most likely will encourage individuals to create pass-through businesses. The most common ones would be Sole Proprietorship, Partnership and Limited Liability Company.

Individuals who earn income through pass-through businesses may qualify to deduct from their income tax an amount equal to up to 20% of their “Qualified Business Income” (“QBI”) from each pass-through business they own. (IRC Sec. 199A.) QBI is the net income (profit) your pass-through business earns during the year. You determine this by subtracting all your regular business deductions from your total business income. QBI includes rental income so long as your rental activity qualifies as a business (as most do). It also includes income from publicly traded partnerships, real estate investment trusts (REITs), and qualified cooperatives.
QBI does not include:

Short-term or long-term capital gain or loss—for example, a landlord would not include capital gain earned from selling a rental property
Dividend income
Interest income
Wages paid to S corporation shareholders
Guaranteed payments to partners in partnerships or LLC members
Business income earned outside the United States.

Here are some QBI deduction examples:

Scenario 1:You Have a Qualified Business Loss

That is, your net QBI is zero or less--you get no pass-through deduction for the year. Any loss is carried forward to the next year and is deducted against your QBI for that year. This serves as a penalty for having a money-losing business

Example i: During 2018, George earned $20,000 in QBI from his bitcoin mining business and had a $50,000 loss from his bakery business. He had a $30,000 qualified business loss, so he gets no pass-through deduction for 2018. The $30,000 loss must be carried forward and deducted from his QBI for 2019.

Scenario 2:You Have Taxable Income

To determine your pass-through deduction, you must first figure your total taxable income for the year (not counting the pass-through deduction). This is your total taxable income from all sources (business, investment, and job income) minus deductions, including the standard deduction ($12,000 for singles and $24,000 for marrieds filing jointly in 2018). You must have positive taxable income to take the pass-through deduction.

Example ii: Larry, a single taxpayer, runs a consulting business which earned $100,000 in profit this year. He had no other income and takes the standard deduction ($12,000). His taxable income is $88,000 ($100,000 income - $12,000 standard deduction = $88,000). His pass-through deduction cannot exceed $17,600 (20% x $88,000 = $17,600). Thus, although Larry had $100,000 in QBI, his deduction is limited to $17,600, not 20% of $100,000 = $20,000.

Scenario 3: 20% Deduction for Taxable Income Below $315,000 ($157,500 for Singles)

If your taxable income is below $315,000 if married filing jointly, or $157,500 if single, your pass-through deduction is equal to 20% of your qualified business income (QBI). This is the maximum possible pass-through deduction.

Example iii: Tom is single and operates his public relations business as a sole proprietorship. His business earns $100,000 in qualified business income during the year. His total taxable income for the year is $120,000. His pass-through deduction is 20% x $100,000 QBI = $20,000. He may deduct $20,000 from his income taxes.

Scenario 4:Taxable Income $315,000 to $415,000 (157,500 to $207,500 for Singles)

If your taxable income exceeds $315,000 if married, or $157,500 if single, calculating your deduction is much more complicated and depends on your total income and the type of work you do. First of all, you need to determine whether your business falls within one of the following specified service provider categories:

Health (doctors, dentists, and other health fields)
Law
Accounting
Actuarial Science
Performing Arts
Consulting
Athletics
Financial Services
Brokerage Services
Investing and investment management
Trading and dealing in securities or commodities

If you’re a non-specified service provider and your taxable income is $315,000 to $415,000 if you’re married filing jointly, or 157,500 to $207,500 if you’re single, the W2 wages/property limitation is phased in—that is, only part of your deduction is subject to the limit and the rest is based on 20% of your QBI. The phase-in range is $100,000 for marrieds, and $50,000 for singles. At the top of income the range ($415,000 for marrieds, $207,500 for singles), your entire deduction is subject to the W2 wages/business property limit: If you have no W2 wages or business property, you get no deduction.

Example iv: Sid and Nancy are married and operate a bike rental business as an LLC. Their QBI this year is $345,000, and the business pays $100,000 in W-2 wages and owns no property. Their phase-in percentage is 30% because their $345,000 QBI is $30,000 over the $315,000 limit. Their deduction if the W2 wages/property limit didn’t apply would be 20% of their $345,000 QBI, which equals $69,000. Their full deduction based on W2 wages is $50,000 (50% of $100,000 W2 wages = $50,000). The difference between the two is $19,000. This amount is multiplied by the 30% phase-in percentage to determine the phase-in amount, which is $5,700 (30% x $19,000 = $5,700). The phase-in amount is subtracted from the $69,000 deduction based on QBI, resulting in a deduction of $63,300 ($69,000 - $5,700 = $63,300). Had their QBI been $415,000, their phase-in percentage would have been 100% and their total deduction limited to 50% of their W2 wages, or $50,000 ($69,000 - $19,000 = $50,000).

More scenarios to be posted in next edition...

全新合格營業收入抵扣

人們已註意到2018年個人納稅申報表新的1040表格第2頁上的“合格營業收入扣除”一行（第九行）。你知道這個新的扣除是什麼嗎？在上個月的時事通訊中，我們談到了企業主新的20％的轉價稅減免。它也被稱為199A扣除。 “減稅和就業法”為轉價業務的所有者創造了全新的稅收減免。此扣除始於2018年，計劃持續到2025年。由於199A扣除的適宜性，它很可能會鼓勵個人創建轉價業務。最常見的是獨資企業，合夥企業和有限責任公司。

通過轉價業務賺取收入的個人可能有資格從其所得稅中扣除相當於其所擁有的每個轉價業務的“合格業務收入”（“QBI”）的 20％的金額。（IRC Sec.199A。）QBI是你的轉價業務在這一年中賺取的淨收入（利潤）。你可以通過從總業務收入中減去所有常規業務花費來確定收入。 QBI包括租金收入，只要你的租賃活動符合企業資格（與大多數企業一樣）。它還包括來自公開上市交易的合夥企業，房地產投資信託（REITs）和達標合作社的收入。

QBI不包括：

短期或長期資本收益或損失- 例如，房東不會包括出售出租房產所賺取的資本收益
股息收入
利息收入
支付給S公司股東的工資
保證支付給合夥人或LLC成員的合夥人
在美國境外賺取的營業收入。

以下是一些合格營業收抵扣示例:

例案 1: 你有合格的營業虧損

也就是說，你的淨QBI為零或更低 - 你無法獲得當年的扣除。任何損失將結轉至下一年，並根據你當年的QBI扣除。這對於有虧損的公司來說是一種懲罰

Example i: During 2018, George earned $20,000 in QBI from his bitcoin mining business and had a $50,000 loss from his bakery business. He had a $30,000 qualified business loss, so he gets no pass-through deduction for 2018. The $30,000 loss must be carried forward and deducted from his QBI for 2019.

例案 2: 你有應納稅所得

要確定你的轉價扣除額，你必須先計算當年的應納稅所得額（不計入轉價扣除額）。這是你來自於所有來源（商業，投資和工作收入）的總應稅收入減去扣除額，包括標準扣除額（2018年單身人士12,000美元，聯合申報的結婚人士24,000美元）。你必須有正的應納稅所得才能獲得轉價扣除。

Example ii: Larry, a single taxpayer, runs a consulting business which earned $100,000 in profit this year. He had no other income and takes the standard deduction ($12,000). His taxable income is $88,000 ($100,000 income - $12,000 standard deduction = $88,000). His pass-through deduction cannot exceed $17,600 (20% x $88,000 = $17,600). Thus, although Larry had $100,000 in QBI, his deduction is limited to $17,600, not 20% of $100,000 = $20,000.

例案 3: 應納稅所得額低於315,000美元 (單身人士157,500美元)的20%抵扣

如果聯合申報納稅人應稅收入低於315,000美元，如果單身則為157,500美元，則你的轉價扣除等於合格營業收入（QBI）的20％。這是最大的傳價扣除。

Example iii: Tom is single and operates his public relations business as a sole proprietorship. His business earns $100,000 in qualified business income during the year. His total taxable income for the year is $120,000. His pass-through deduction is 20% x $100,000 QBI = $20,000. He may deduct $20,000 from his income taxes.

例案 4: 應納稅收入315,000美元至415,000美元(單身人士157,500至207,500美元)

如果你的應稅收入超過315,000美元，如果已婚，或157,500美元（如果是單身），計算你的扣除額要復雜得多，取決於你的總收入和工作類型。首先，你需要確定你的業務是否屬於以下指定的服務提供商類別之一：

健康（醫生，牙醫和其他健康領域）
法律
會計
精算科學
表演藝術
諮詢
競技
金融服務
經紀服務
投資和投資管理
交易證券或相關商品

如果你是非指定服務提供商，並且你已經結婚聯合申報，你的應稅收入為315,000美元至415,000美元，如果您是單身，應稅收入為157,500至207,500美元，W2工資/財產限制將分階段進行 - 即你的部分扣除額受限制，其餘部分基於你QBI的20％。已婚人士限制開始於100,000美元，單身人士50,000美元。在收入範圍最高（已婚人士為415,000美元，單身人士為207,500美元）時，你的全部扣除額受W2工資/商業財產限制的限制：如果你沒有W2工資或商業財產，則不會扣除。

Example iv: Sid and Nancy are married and operate a bike rental business as an LLC. Their QBI this year is $345,000, and the business pays $100,000 in W-2 wages and owns no property. Their phase-in percentage is 30% because their $345,000 QBI is $30,000 over the $315,000 limit. Their deduction if the W2 wages/property limit didn’t apply would be 20% of their $345,000 QBI, which equals $69,000. Their full deduction based on W2 wages is $50,000 (50% of $100,000 W2 wages = $50,000). The difference between the two is $19,000. This amount is multiplied by the 30% phase-in percentage to determine the phase-in amount, which is $5,700 (30% x $19,000 = $5,700). The phase-in amount is subtracted from the $69,000 deduction based on QBI, resulting in a deduction of $63,300 ($69,000 - $5,700 = $63,300). Had their QBI been $415,000, their phase-in percentage would have been 100% and their total deduction limited to 50% of their W2 wages, or $50,000 ($69,000 - $19,000 = $50,000).

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