20% Deduction for Pass-Through Entity Owners and Investors in Real Estate

Included in the “Tax Cuts and Jobs Act” that takes effect for years 2018-2025, is the Section 199A which is known as the 20% Deduction for Pass-Through Entity Owners and Investors in Real Estate.  The following are eligible to take advantage of Section 199A:

  • Sole proprietorships
  • S corporations
  • Partnerships
  • Multiple-member LLCs treated as parnerships
  • Schedule E real estate investors
  • Trust and estates with an interest in a pass-through entity
  • Qualified cooperatives
  • Real estate investment trusts

The 20% Deduction works as follows in its most basic form:

  • Deduction is 20% of “qualified business income(QBI) from a partnership, S corporation or sole proprietorship
  • QBI is the net amount of items of income, gain, deduction and loss with respect to a trade or business
  • Business must be conducted within the United States
  • Single individual with taxable income of $157,500 or less and $315,000 or less for Married Filing Joint may take the Section 199A.
  • Above these thresholds the rules become more complicated and not all trades or businesses are eligible to take the Section 199A.

If you would like to learn more about this tax strategy, please call Susan at 630.523.5762.

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