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I'm no expert, but from what I've seen, many people who are reading this should not get their hopes up. If you're a software developer operating either as a so

I'm no expert, but from what I've seen, many people who are reading this should not get their hopes up. If you're a software developer operating either as a sole proprietorship or as an S corporation, I don't think you'll get the deduction. (If you have an LLC, that doesn't mean anything to the IRS; it's treated either as a "disregarded entity", i.e. a sole proprietorship, or as an S or C corp if you've taken that election.) See Steve's comment on the article from 12/19 at 2:48 PM, replying to someone asking whether developers and other IT professionals would get this break: > The Sec. 199A statute references another older chunk of tax law, Sec 1202(e)(3)(A). It says this: > “…any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees…” > So computer/IT consulting pretty clearly fits within the “consulting” category. > Also, if you’re a one person business, it seems pretty tricky to argue against the position that the principal asset of the business is the reputation or skill of the 1 employee doing the work. I would appreciate correction if I'm misunderstanding this, as I certainly like tax deductions!

freehunter 9y ago
> Also, if you’re a one person business, it seems pretty tricky to argue against the position that the principal asset of the business is the reputation or skill of the 1 employee doing the work. What if you're a one-person business but you're a reseller or a consignment shop like most mom-and-pop stores? That takes very little skill or reputation. Not trying to argue, that's an actual legitimate question I have.
- munk-a 9y ago
  As a business we can assume you're bringing something to the table, that bests your competitors, is it the skill with which you've built your distribution chain? Your reputation for being able to move goods? I don't see how that vague wording couldn't be expanded to cover everyone, it'd certain cover Trump with his self-professed "Brand Name Value" pretty much all he ever sells is his name.
tunesmith 9y ago
I've heard reporting on both sides here, at least it's not clear to me yet. Some versions of the law limited this only if you made more than a certain amount, but if you made less you could still take the deduction even if you were one of the listed professions. But I've always read about games you could play, like buying the office building you operate in and then charging your software business an exorbitant amount of rent. It seems like that's a lot more overt than just a "gray area" though.
NickM 9y ago
My understanding though is that these restrictions only apply to high earners (>157.5k single, >315k married), and even then the restrictions phase in gradually until you hit an even higher income. I would bet that most software developers have low enough incomes to qualify for some or all of the deduction, regardless of whether developers and IT professionals fall under the restricted categories. I could be wrong, so don't take my word for it, but I wouldn't give up hope just yet unless someone can elaborate on why this isn't the case.
- zrail 9y ago
  Yep. Keep in mind that those numbers are taxable income not gross income. That means all deductions (including the standard deduction) except the 199A deduction itself apply before the 199A deduction. Even if you make a huge amount of gross income you can get below that threshold fairly easily by, for example, setting up a 401(k) and a defined benefit pension plan.
zrail 9y ago
If your taxable income (i.e. income after above- and below-the-line deductions including the standard deduction, but before this deduction) is less than the threshold amount ($315,000 for married filing jointly, half that for single) then the specified trade or business aspect doesn't apply. From the bill text: https://www.congress.gov/bill/115th-congress/house-bill/1/text/eas2 https://www.congress.gov/bill/115th-congress/house-bill/1/te...? “(3) EXCEPTION FOR SPECIFIED SERVICE BUSINESSES BASED ON TAXPAYER'S INCOME.— “(A) IN GENERAL.—If, for any taxable year, the taxable income of any taxpayer is less than the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), then— “(i) any specified service trade or business of the taxpayer shall not fail to be treated as a qualified trade or business due to paragraph (1)(A)
spikels 9y ago
According to the article you WILL get the deduction but it will begin to phase out as your taxable income exceeds $315,000 for married individuals filing jointly or $157,500 for individuals
Clanan 9y ago
I believe the new tax bill excludes architecture and engineering from that list. In other words, they would get the deduction.

freehunter 9y ago

> Also, if you’re a one person business, it seems pretty tricky to argue against the position that the principal asset of the business is the reputation or skill of the 1 employee doing the work. What if you're a one-person business but you're a reseller or a consignment shop like most mom-and-pop stores? That takes very little skill or reputation. Not trying to argue, that's an actual legitimate question I have.

munk-a 9y ago
As a business we can assume you're bringing something to the table, that bests your competitors, is it the skill with which you've built your distribution chain? Your reputation for being able to move goods? I don't see how that vague wording couldn't be expanded to cover everyone, it'd certain cover Trump with his self-professed "Brand Name Value" pretty much all he ever sells is his name.

tunesmith 9y ago

I've heard reporting on both sides here, at least it's not clear to me yet. Some versions of the law limited this only if you made more than a certain amount, but if you made less you could still take the deduction even if you were one of the listed professions. But I've always read about games you could play, like buying the office building you operate in and then charging your software business an exorbitant amount of rent. It seems like that's a lot more overt than just a "gray area" though.

NickM 9y ago

My understanding though is that these restrictions only apply to high earners (>157.5k single, >315k married), and even then the restrictions phase in gradually until you hit an even higher income. I would bet that most software developers have low enough incomes to qualify for some or all of the deduction, regardless of whether developers and IT professionals fall under the restricted categories. I could be wrong, so don't take my word for it, but I wouldn't give up hope just yet unless someone can elaborate on why this isn't the case.

zrail 9y ago
Yep. Keep in mind that those numbers are taxable income not gross income. That means all deductions (including the standard deduction) except the 199A deduction itself apply before the 199A deduction. Even if you make a huge amount of gross income you can get below that threshold fairly easily by, for example, setting up a 401(k) and a defined benefit pension plan.

zrail 9y ago

If your taxable income (i.e. income after above- and below-the-line deductions including the standard deduction, but before this deduction) is less than the threshold amount ($315,000 for married filing jointly, half that for single) then the specified trade or business aspect doesn't apply. From the bill text: https://www.congress.gov/bill/115th-congress/house-bill/1/text/eas2 https://www.congress.gov/bill/115th-congress/house-bill/1/te...? “(3) EXCEPTION FOR SPECIFIED SERVICE BUSINESSES BASED ON TAXPAYER'S INCOME.— “(A) IN GENERAL.—If, for any taxable year, the taxable income of any taxpayer is less than the sum of the threshold amount plus $50,000 ($100,000 in the case of a joint return), then— “(i) any specified service trade or business of the taxpayer shall not fail to be treated as a qualified trade or business due to paragraph (1)(A)

spikels 9y ago

According to the article you WILL get the deduction but it will begin to phase out as your taxable income exceeds $315,000 for married individuals filing jointly or $157,500 for individuals

Clanan 9y ago

I believe the new tax bill excludes architecture and engineering from that list. In other words, they would get the deduction.