California CPA for Section 199A Consultation

The section 199A deduction, which is also known as the qualified business income deduction (QBI), allows non-corporate taxpayers to deduct up to 20 percent of their qualified business income and 20 percent of their qualified real estate investment trust dividends from their taxes. Individuals, as well as owners of sole proprietorships, S corporations, and partnerships can qualify for this deduction.

During a consultation with an accountant, you can figure out whether you qualify for this deduction, calculate your section 199A deduction following multiple methods, and gain an understanding of certain rules you must adhere to. If you would like to have a consultation with an accountant about your 199A deduction, get in touch with California accountants from Cook CPA Group as soon as possible.

Understanding Section 199A Qualified Business Deductions in California

Claiming the 199A qualified business deduction is a way for individuals and businesses to save a great deal of money on their taxes.

The qualified business deduction allows pass-through entities to deduct up to 20 percent of their qualified domestic business income and their real estate investment trust dividends from their taxes. Pass-through entities are sole proprietorships, partnerships, S-corporations, trusts, and estates. The deduction can only be made from qualified business income and real estate investment trust dividends. Qualified business income (also known as QBI) is any trade or business’s net amount of qualified income, gain, loss, and deduction items. W-2 income, capital gains and losses, interest income, certain amounts received, and certain dividends are not included in qualified business income.

Only specified service trades and businesses are able to claim the qualified business deduction—specified service trades and businesses are those that involve the performance of services in certain fields. These fields include accounting and financial services, health, law, performing arts, consulting, athletics, actuarial science, or brokerage services. It also includes any trade or business in which the principal asset is the reputation or skill of one or more of the people employed. To meet the requirements for this deduction, the business must be engaged in the qualifying activity with regularity.

How to Qualify for the 199A Qualified Business Deduction in California

Businesses and individuals can only qualify for the 199A qualified business deduction if they meet certain criteria. Firstly, your business must be a pass-through entity. Secondly, the deduction can only be claimed for qualified business income. Trades or businesses that are within one entity must be treated separately and must be able to compute their own business income.

There are also certain income limitations that determine whether an individual or business qualifies for the 199A qualified business deduction. Individuals and joint filers that make below the threshold can calculate their deduction by taking their QBI and deduct a percent of it against their specific trade of business. Individuals and businesses that make above the threshold can only claim the deduction if their business is a specified service trade or business.

Components of the Qualified Business Deduction

There are two components to the section 199A qualified business deduction. The first is the qualified business income component. This entails a 20 percent deduction of qualified business income from a sole proprietorship, partnership, S corporation, trust, or estate. Limitations apply according to the taxpayer’s taxable income and the type of trade of business that they are involved in. The amount of W-2 wages they paid and their unadjusted basis immediately after acquisition (UBIA) may also affect their deduction.

Another component of the qualified business income deduction is the real estate investment trust (REIT) and publicly traded partnership (PTP) component. This component entails the deduction of 20 percent of the company’s qualified REIT dividends and qualified PTP income. Like the qualified business income component, this component is limited by the amount of income the taxpayer makes and the type of business that they are engaged in. The total deduction that can be made is either: the lesser qualified business income component plus the REIT/PTP component or 20 percent of the total taxable income of the taxpayer minus their net capital gain.

Taxpayers should note that this deduction is available for all taxable years, ending in 2025. Taxpayers can claim this deduction regardless of whether they have itemized their deductions on Schedule A or taken the standard deduction. There is no form meant specifically for reporting the 199A deduction. However, taxpayers can use worksheets to help them compute their deduction, which they can complete with the assistance of an experienced qualified business income deduction accountant.

How Our California Accountant Can Help You with Your Section 199A Deduction

The accountants that work with Cook CPA Group are available to help individuals and companies that qualify as a specified service trade or business with their 199A deductions. During a consultation, our experienced accountants can identify whether your business qualifies as a specified trade or business, calculate the amount of your deduction according to both the aggregate and non-aggregate method, restructure your taxes to minimize your tax liability, and review rules that you must adhere to if your business is a certain type.

Consult with a California CPA for Section 199A Deductions

Don’t waste any time determining whether you or your business qualifies for a 199A deduction. Get in touch with an accountant from California CPA firm Cook CPA Group soon to schedule a consultation to discuss your qualified business income deduction.