Section 199A Table
To help explain the 199A issues involving filing status, 1040 taxable income, and the type of trade or business a taxpayer owns, TaxBuzz has created the following chart.
The most difficult concept in understanding how the Section 199A deduction works is the aforementioned relationship between:
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Filing status
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The taxpayer’s 1040 taxable income, and
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The type of trade or business.
To help with that we have developed the table below that allows you to quickly determine whether a deduction is allowed, and if so, what limitations apply.
Taxable Income Below the Thresholds
Note from the chart above, as long as the taxpayer’s taxable income is below the threshold, both QTB and SSTB have no limitations and the Sec 199A deduction is a simple 20% of QBI (before applying the 1040 taxable income limitation discussed next).
1040 Taxable Income Limitation
After computing the 199A deduction for each of a taxpayer’s pass-through business activities and then summing them all up for the total Sec 199A deduction, that deduction is then limited to the lesser of the 199A sum or 20% of the taxpayer’s taxable income, less net capital gain. For this purpose, net capital gain includes qualified dividends.