A Look at the Final Section 199A Regulations
On January 18th, the Treasury and IRS issued a joint release, IR-2019-04, containing the eagerly-anticipated final regulations for Section 199A, a new provision under the 2017 Tax Cuts and Jobs Act (TCJA). To read IR-2019-04—which is made up of a set of regulations, a revenue procedure, and an additional notice—in full, visit www.irs.gov.
Section 199A covers a new deduction for pass-through entities (e.g., sole-proprietorships, partnerships, S-corporations, trusts, and estates) of up to 20 percent of qualified business income (QBI). In the wake of the passage of the TCJA, the IRS released proposed regulations in regards to this section. They received hundreds of comments in response to their proposal, which they took under advisement in producing the final Section 199A regulations.
Here’s a quick summary of the items included in the recent IRS release:
- Section 199A regulations, which are the final update to the proposed regulations issued last year. These provide helpful guidance in a number of areas pertaining to the QBI deduction, including REIT dividends received by regulated investment companies;
- Revenue Procedure 2019-11, which provides guidance on determining W-2 wages for QBI deduction purposes; and
- A notice about a new proposed Section 199A regulation pertaining to treating a safe harbor for certain real estate enterprises as a trade or business for the purposes of the QBI deduction.
Here are some helpful resources for those wanting to take a deep dive into the specifics of Section 199A:
- A detailed overview of the final Section 199A regulations.
- A step-by-step guide for determining if you qualify for the pass-through deduction and, if you do, calculating it.
- A FAQ on Section 199A from the IRS website.