Qualified Business Income Deduction and the Entertainment Industry

The Tax Cuts and Jobs Act (TCJA) has had an impact on many industries since it was enacted in December 2017, and the entertainment industry is no different. The act, passed and signed into law on December 22, 2017 by President Donald Trump, is one of the largest changes to the tax code since the Tax Reform Act of 1986.(1) Part of this tax laws overhaul is the Qualified Business Income (QBI) Deduction commonly referred to as the Section 199A Deduction by tax professionals. But exactly what is the QBI Deduction and how does it impact the entertainment industry?

As of the 2018 tax year, the QBI deduction is available to individuals, certain trusts, estates, S corporations, and partnerships. These qualified taxpayers can get a deduction of up to 20% of income for a qualified trade or business.(2) A qualified trade or business is defined as any business with a regular, continuous profit motive(3) with the exception of businesses structured as a C corporation, the trade or business of performing services as an employee, and specified service trades or businesses (SSTBs). The SSTB exception does not apply for…Continue here »

(1) H.R. 1 – An Act to Provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 – Congress.gov
(2) Tax Cuts and Jobs Act, Provision 11011 Section 199A – Qualified Business Income Deduction FAQs – IRS.gov
(3) Section 199A Rental Property Trade or Business Definition – Evergreensmallbusiness.com

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KROST Quarterly is a digital publication that highlights some of the hot topics in the accounting and finance industry. Volume 2, Issue 4 highlights some of the hot topics in sports & entertainment including tax issues for athletes, Loan-Out Corporations, Qualified Business Income Deduction, and more.