Question: Jane is a Partner in a partnership with a July 31 year end. What information does she use to calculate the Sec. 199A deduction she claims on her 2018 Form 1040, U.S. Individual Income Tax Return?
Short Answer: Jane uses the information from her partnership Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., for the year ended July 31, 2018. It doesn’t matter that the K-1 includes months prior to the effective date of Sec. 199A because this provision applies to individuals for their tax years beginning after Dec. 31, 2017.
Now, the longer explanation:
P.L. 115-97, known as the Tax Cuts and Jobs Act (TCJA), added several new provisions to the tax code, many of which add complexity in terms of new calculations, interplay with other provisions and past tax decisions, and tax planning changes. Among these changes is new Sec. 199A potentially allowing a 20% deduction against qualified business income for certain noncorporate taxpayers. This provision consumes nine pages of the 185-page public law.