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Section 199A: What if I have a QBI loss?

QBI, Section 199A, tax reform, deductionTax filing season is in full swing. With the new 2018 tax changes, most taxpayers and business owners have questions about how their taxes will be affected.  One of the most talked about changes for small business owners is Section 199A Qualified Business Income (QBI) and the potential 20% QBI deduction. But what if now that the year is complete you think you may have a QBI loss?

QBI is the net amount of qualified items of income, gain, deduction and loss with respect to the qualified trade or business of a taxpayer. It is a multi-step calculation that is determined separately for each of a taxpayer’s qualified businesses.

Read more about Section 199A and other tax reform changes

Any losses from one QBI qualified business must be netted against the gains from another. The bad news is that this means that a taxpayer’s overall potential QBI deduction will likely be reduced (possibly down to zero).
If the net overall QBI is less than zero, it is carried forward as a loss from a separate qualified business and will reduce any potential QBI deduction in the following year (IRC Sec. 199A (c)(2)).

Contact your Henry+Horne tax advisor for assistance to determine whether your business is Qualified Business Income eligible, how to calculate your QBI and any potential QBI deduction and how it will affect your taxes.

Kimberly Hughes, CPA