{"id":83,"date":"2018-11-13T17:25:06","date_gmt":"2018-11-13T17:25:06","guid":{"rendered":"http:\/\/www.rikardneal.com\/blog\/?p=83"},"modified":"2018-10-25T17:30:57","modified_gmt":"2018-10-25T17:30:57","slug":"what-is-qualified-business-income-qbi-and-why-does-it-matter","status":"publish","type":"post","link":"https:\/\/www.rikardneal.com\/blog\/index.php\/2018\/11\/13\/what-is-qualified-business-income-qbi-and-why-does-it-matter\/","title":{"rendered":"What is Qualified Business Income (QBI) and Why Does It Matter?"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-84 alignleft\" src=\"http:\/\/www.rikardneal.com\/blog\/wp-content\/uploads\/2018\/10\/ThinkstockPhotos-516849552-300x200.jpg\" alt=\"rikard and neal cpas memphis TN\" width=\"300\" height=\"200\" srcset=\"https:\/\/www.rikardneal.com\/blog\/wp-content\/uploads\/2018\/10\/ThinkstockPhotos-516849552-300x200.jpg 300w, https:\/\/www.rikardneal.com\/blog\/wp-content\/uploads\/2018\/10\/ThinkstockPhotos-516849552-768x512.jpg 768w, https:\/\/www.rikardneal.com\/blog\/wp-content\/uploads\/2018\/10\/ThinkstockPhotos-516849552-1024x683.jpg 1024w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>The new Section 199A provides self-employed taxpayers the ability to deduct up to 20% of their Qualified Business Income (QBI) on their tax returns. In general, QBI is net income that is received from a Qualified Trade or Business. However, there are some exclusions, the most common of which are capital gains, dividend and interest income. Additionally, any guaranteed payments or \u201creasonable compensation\u201d paid to owners is excluded.<\/p>\n<p><strong>How Does the New Tax Law Define QBI?<\/strong><\/p>\n<p>Section 199A(c) defines QBI as, \u201cthe net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.\u201d The section further states that qualified REIT dividends, qualified cooperative dividends, and qualified publicly traded partnership income are specifically excluded from the definition of QBI.<\/p>\n<p><strong>What are \u201cQualified Items of Income, Gain, Deduction, and Loss?\u201d<\/strong><\/p>\n<p>Qualified items of income, gain, deduction, and loss are defined as items that are connected with a trade or business that is operated in the United States and are generally included or allowed when a business determines its taxable income for the year. However, there are items that are specifically excluded:<\/p>\n<ul>\n<li>Short-term capital gains and losses<\/li>\n<li>Long-term capital gains and losses<\/li>\n<li>Dividends<\/li>\n<li>Interest income<\/li>\n<li>Foreign personal holding income<\/li>\n<li>Income from an annuity if not received in connection with the business<\/li>\n<\/ul>\n<p>These items may not be income or deductions for purposes of calculating QBI. A basic method of viewing QBI is \u201cordinary\u201d income less \u201cordinary\u201d expenses. In other words, investment gains and expenses are not QBI for Section 199A purposes.<\/p>\n<p><strong>Reasonable Compensation and Guaranteed Payments<\/strong><\/p>\n<p>In addition to the items discussed above, any reasonable compensation paid to the taxpayer by the business, including guaranteed payments, is not QBI. For example, if you receive $50,000 in wages from an LLC that you own and your share of income at the end of the year is $100,000 \u2013 only the $100,000 would be considered QBI.<\/p>\n<p>Rikard &amp; Neal CPAs, PLLC, a Memphis area CPA offers a <a href=\"https:\/\/www.rikardneal.com\/consultation.htm\" target=\"_blank\" rel=\"noopener\">FREE initial consultation<\/a>\u00a0to business owners.\u00a0<a href=\"mailto:ed@rikardneal.com\">Email us\u00a0<\/a>or call us at\u00a0901-685-9411\u00a0today.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new Section 199A provides self-employed taxpayers the ability to deduct up to 20% of their Qualified Business Income (QBI) on their tax returns. In general, QBI is net income that is received from a Qualified Trade or Business. However, there are some exclusions, the most common of which are capital gains, dividend and interest [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":{"0":"post-83","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business-tax","7":"entry"},"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/83","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=83"}],"version-history":[{"count":2,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/83\/revisions"}],"predecessor-version":[{"id":86,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/83\/revisions\/86"}],"wp:attachment":[{"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=83"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=83"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rikardneal.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=83"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}