Understanding the new Sec. 199A business income deduction

By Tony Nitti, CPA 

With the enactment of legislation known as the Tax Cuts and Jobs Act (the Act)¹ on Dec. 22, 2017, a new provision of the Internal Revenue Code was born: Sec. 199A, which permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of the income earned by the business. The motivation for the new deduction is clear: to allow these business owners to keep pace with the significant corporate tax cut also provided by the Act.