Question

Which of the following is not correct regarding the Section 199A deduction? A. Taxpayers with incomes...

  1. Which of the following is not correct regarding the Section 199A deduction?

A. Taxpayers with incomes below an annual threshold amount of taxable income will compute their deduction without taking the W-2 wages and depreciable assets computation into account.

B. The provisions of Section 199A are subject to a sunset provision & will expire after the 2025 tax year unless Congress takes action to extend the provisions or make them permanent

C. Most states will recognize the Section 199A deduction for state income tax purposes, as state tax computations generally start with federal taxable income

D. The deduction cannot exceed 20% of ordinary taxable income

Homework Answers

Answer #1

Answer:- D  The deduction cannot exceed 20% of ordinary taxable income

Section 199A deduction equals the lesser of:

(i) 20 percent of the QBI (generally defined as the net amount of qualified items of income, gain, deduction, and loss with respect to a qualified trade or business of the taxpayer) from the individual's trades or businesses plus 20 percent of the individual's combined qualified REIT dividends and qualified PTP income

OR
(ii) 20 percent of the excess (if any) of the individual's taxable income over the individual's net capital gain.

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