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Qualified Business Income (Section 199A) Deduction Many individuals, including owners of businesses operated through Sole Proprietorships, Partnerships, S Corporations, and some Trusts and Estates may be eligible for a Qualified Business Income Deduction, also called the Section 199A deduction. The deduction is found in tax law enacted in December of 2017 and it allows eligible owners of these businesses to deduct up to twenty percent of their qualified business income. Business owners can also claim twenty percent of qualified real estate investment trusts (REIT) dividends and qualified publicly traded partnership (PTP) income. Income earned by a C corporation or by providing services as an employee isn't eligible for the deduction. The deduction is available for tax years beginning after December 31, 2017. Eligible taxpayers can claim it for the first time on their 2018 federal income tax returns filed in 2019. What is Qualified Business Income? QBI is the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts. These includable items must be effectively connected with the conduct of a trade or business within the United States. Generally, in computing QBI, business owners must account for any deduction attributable to the trade or business. This includes, but is not limited to, the deductible part of self-employment tax, self-employed health insurance, and deductions for contributions to qualified retirement plans, such as SEP, SIMPLE, and qualified plan deductions. To complete a Schedule C, you'll first fill in standard information about yourself and your business. You'll also notice that there's a place for you to enter a Principal Business or Professional Activity Code. These codes are based on the North American Industry Classification System, and the Schedule C instructions contain a list of the six-digit codes Gross Receipts and Returns & Allowances Cost of goods sold Gross Profit and Gross Income Bartering Completing Schedule C Part II, Expenses Expenses must be considered ordinary and necessary business expenses in order to be deducted. We also encourage you to see IRS Publication 535, Business Expenses, for more information. Car and Truck Expense Depreciation Tax Cut and Jobs Act of 2017 - Changes to Expensing and Depreciation Legal and Professional Services and Office Expenses Travel, Meals, and Entertainment Net Profit or Loss Possible Deductions on Form 1040 Deducting Start-up Costs Self-Employment and Estimated Tax