Eligible taxpayers may now deduct up to 20% of certain business income from domestic businesses operated as sole proprietorships or through partnerships, S-corporations, trusts, and estates. The deduction may also be claimed on certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019.

Some things business owners should know about this deduction.

The deduction applies to qualified:

• Business income
• Real estate investment trust dividends
• Publicly traded partnership income
• Only items included in taxable income are counted
• Deduction is available whether they itemize their deductions on Schedule A or take the standard deduction.
• Deduction is generally equal to the lesser of these two amounts:
  • Twenty percent of qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income.
  • Twenty percent of taxable income computed before the qualified business income deduction minus net capital gains.
• Taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction may be subject to additional limitations or exceptions.