Spencer Accounting Group, LLC - Tax Planning and Preparation Services - West Allis, Milwaukee, Brookfield, Waukesha, United States and Saudi Arabia
  • Home
  • Pricing
    • Rush & Cancellation Policy
  • Let's Chat
  • Home
  • Pricing
    • Rush & Cancellation Policy
  • Let's Chat

FREE Tax Tips and Updates

Browse our blog for helpful tax planning and preparation information.

QBI Update: Impact of Negative QBI and Previously Suspended Losses

3/17/2021

0 Comments

 
Picture
For 2018-2025, you (and estates and trusts) can use your qualified business income (QBI) to create the 20 percent deduction under Section 199A.


While federal income tax losses from business activities are usually beneficial, losses from pass-through business entities can have the adverse side effect of reducing allowable QBI deductions for pass-through business entity owners--such as you.


In this context, pass-through entities are defined as sole proprietorships, single-member (one owner) LLCs treated as sole proprietorships for federal income tax purposes, partnerships, multimember LLCs treated as partnerships for federal income tax purposes, and S corporations.


These entities can pass through business losses that you can deduct in the current year. But a pass-through of a loss could harm your QBI for the current year.


Or you may have to suspend the losses and carry them forward to future years. The suspended losses can also result in negative QBI in the year you deduct them.


Negative QBI from one source offsets positive QBI from other sources.
If you have overall negative QBI for the year, you must carry forward the negative amount to future years to offset positive QBI in those years. That can result in lower QBI deductions in carry-forward years.
The negative QBI issue is especially relevant now, since COVID-19 economic fallout will cause many pass-through business entities to pass through negative QBI amounts to their owners for 2020 and possibly for 2021 as well.
You also may have suspended pass-through business entity losses from prior years that are now deductible, such as suspended passive losses from rental real estate properties that have been sold. Suspended passive losses can also be “freed up” when you have passive income. Previously suspended losses can cause negative QBI in the year they become deductible.


If you own multiple businesses and/or rental properties, the Section 199A deduction can get complicated. If you would like my help sorting this out for you, please don’t hesitate to contact us.




0 Comments



Leave a Reply.

    We're Here to Help

    Get advice from our experienced network of financial managers. 
    ​

    If you Value our Blog, We have an ask.

    We spend hours researching data to help you understand your finances and taxes, including historical context, issues, and solutions. Our goal is to empower people to improve  their relationship with money. ​Please consider a $3 donation today.

    Tax Plan Video

    Important Disclosures


    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

    ​
    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
    ​
    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

    GET STARTED

    Author

    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

    RSS Feed

    Accounting Services
    Tax Preparation
    Picture
    Picture
Home
Net30 Account Info
Privacy Policy
Contact Us

Picture
Picture
Picture
Copyright 2021 ALL RIGHTS RESERVED.
Photo used under Creative Commons from verchmarco