Last time, I laid out a few things to keep in mind regarding the qualified business income deduction, points regarding its possible future, the importance of having a trade or business, how a rental real estate activity may figure into that, and the computational complexity of the whole ugly, tangled thing.  Today: three more things to keep in mind.

  1. Specified service trades or businesses have become more…specific, and there are definite losers and winners. Remember: a specified service trade or business (SSTB) is one named in the Code and Regulations as being ineligible for the QBI deduction (except when taxable income is low enough – see next point).  Some of those excluded are those involving services in the fields of health, law, accounting, actuarial science, performing arts, and on and on.  Due to lack of guidance after initial passage, there were some categories of service providers unsure of whether they would be included in this group.  There are others still who have been given a significant win in receiving the news that their chosen fields were, in fact, not included.  A couple of notable professions that have received this good news: real estate agents and insurance brokers, both of which were potentially in danger of being included in the excluded “brokerage services” category of SSTBs.  With issuance of the final regs, both groups have breathed collective sighs of relief and are eager to experience the benefits of the QBI deduction, and their respective trade groups have already begun communicating the good news.  Others, such as your friendly neighborhood CPA?  Not so lucky, not that I’m looking for sympathy.  And remember that discussion of taxable income thresholds in Part I?  Well, even if you have one or more SSTBs, if your taxable income is under $315,000 (married filing jointly; half that for others), it doesn’t matter.  You’re eligible.  Yep, even a CPA.  Over $415,000 (married filing jointly; half for others)?  You’re toast.  You get nothing.  In between the two?  Welcome to mathematical heck (it’s a family article) in which you have to work with fractions, look at wage and property limits, and wish for the sweet release of a national sales tax instead.
  2. Taxable income matters. Your level of taxable income (determined at the ultimate taxpayer level, not at the level of the business itself, even if in a separately filing entity) is important in determining eligibility to take a QBI deduction for an SSTB, your computational difficulty, and applicability of limitations. In addition to these and the points made above, this brings up an important point for those taxpayers serving as partners or shareholders in pass-through entities: you need information from those entities that, bless the IRS, they are required to render to you in your Schedules K-1 each year starting with the 2018 year.  The eligibility and attendant computations are ultimately computed at the taxpayer level.
  3. Aggregation and netting? Don’t ignore them. As if all that wasn’t enough, there are also some optional rules for aggregation of activities that meet certain ownership and activity thresholds.  Those rules deserve a look by taxpayers who own, run, and/or are invested in businesses that might meet these standards, as they could result in an enhanced QBI deduction in some cases (such as when the deduction for one business may be limited due to low W-2 wages, while another has excess wages).  Apart from these optional and potentially favorable aggregation rules are non-optional netting rules that require qualifying profits and losses to be netted in certain ways for proper tracking, limitation, and sometimes carryforward.

Okay, that is a lot, frankly a lot more than I intended to try to cram into such a small space (hence the two part split).  Any one of the above points we’ve covered over the past few days could make its own article or scintillating lunchtime conversation – and maybe we will take a swing at both in the coming days.  If you have questions about any of the above, or really anything at all regarding Section 199A, please let us know, and feel free to make suggestions/requests for areas here which you would like to see discussed in further detail.

Michael A. Carraway, Jr., CPA

Michael A. Carraway, Jr., is a partner with GranthamPoole PLLC and a recognized leader in the field of partnership and corporate taxation, having worked with many clients on entity and transaction structuring matters.  He has also written, taught, and spoken on many topics in the area over the years and has served as a technical subject matter expert in several practices.  Please contact Mike at,, or 601-499-2400. CPA License # R2705


***The above does not represent tax advice.  Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.

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