Week 11 introduces the Qualified Business Income deduction, commonly called the QBI deduction or Section 199A deduction. This area can be technical, and the applicable rules should always be checked for the tax year being prepared.
Learning Objectives
- Understand the general concept of qualified business income.
- Recognize that not every item of income is treated the same for QBI purposes.
- Learn the general roles of Forms 8995 and 8995-A.
- Understand why taxable income and other limitations may affect the deduction.
Primary IRS Materials
- Form 8995 and instructions
- Form 8995-A and instructions
- Current IRS Qualified Business Income Deduction guidance
Important Study Approach
Do not rely on an old year’s dollar thresholds or assumptions. Tax laws and limitations can change. Always consult the IRS forms and instructions for the tax year being prepared.
Practice Exercise
Create a fictional S corporation shareholder with pass-through business income. Identify the information that would need to be gathered before determining whether a QBI deduction may be available.
End-of-Week Goal
You should understand where QBI fits conceptually in the individual tax return and know when the issue requires closer analysis.