Final Regulations and Guidance on New QBI Deduction; Real Estate Safe Harbor
The Treasury and the IRS have issued final regulations and related guidance implementing the new qualified business income (QBI) deduction (section 199A deduction). The QBI deduction created by the TCJA allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income. The QBI deduction is not available for wage income or for business income earned by a C corporation.
Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income. Taxpayers will be able to claim the QBI deduction for the first time on their 2018 Form 1040.
The proposed revenue procedure included in the guidance allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met. Taxpayers can rely on this safe harbor until a final revenue procedure is issued. Click here