QBID and Adjustments to Income - Final Regs

More 'information".

From Lucien Gauthier (Boston Tax Institute):

"The purpose of this email is to advise you that today I spoke with one of the named drafters of the final regulations on section 199A and was told that the official position of the National Office of IRS is that if an individual taxpayer relies on the PROPOSED regulations in preparing a 2018 individual return that such taxpayer MUST reduce Qualified Business Income by ½ of the S/E tax, the self-employed health insurance deduction, and a contribution to a section 404 qualified retirement plan and that the software companies are being advised accordingly. The IRS may or may not issue an administrative pronouncement to this effect. "

The IRS has confirmed that QBI must be reduced by the deductions for SEHI, 1/2 of SE tax and self-employed retirement plan contributions, whether or not you rely on the proposed or final regulations. See Q&A-32 on this web page:

https://www.irs.gov/newsroom/tax-cuts-a ... ction-faqs

Does any ROTH Contribution reduce the QBI?

No : Roth Contributions are not part of IRC Section 404 which primarily relates to pension plans

No : Roth Contributions are not part of IRC Section 404 which primarily relates to pension plans

But I assume that I am correct that for purposes of a ROTH IRA contribution you can only do that to the extent that the net profit is greater than he SEHI and 50% FICA adjustments to income. That is the limit indicated by my Proseries software.

I was hoping that like the 50% FICA tax, the SEHI and deductible IRA's/401k's , that the 20% QBID would be an adjustment to income thereby helping some avoid the Part B and D surcharges that kick in the higher AGI levels. But like LTCG it only affects the tax calculation. On a positive note, I just recently became aware that the thresholds for these surcharges are now adjusted for inflation. The 2018 initial break point for MFJ was reported as about $174,000, and likely will be about 176,000 for 2019.

The 2019 modified AGI determines the thresholds for 2021 Part B and D premium surcharges. Has anyone seen and estimate as to what that 2019 threshold amount is likely to be? Some use their IRA QCD to avoid exceeding that threshold.