When figuring the preliminary 199A deduction for a specific qualified trade or business the taxpayer’s 1040 taxable income before deducting the 199A deduction is used.

After the preliminary 199A deductions for each qualified trade or business are determined, combined with the 199A deductions from real estate investment trusts (REITs) and publicly traded partnerships (PTPs), that total is then limited to 20% of the taxpayer’s taxable income. For purposes of this computation the term taxable income refers to the taxpayer’s 1040 AGI minus standard or itemized deductions, but without regard to the Sec 199A deduction and without any net capital gain. Thus, the 199A deduction itself is not considered when determining the taxable income for this purpose.