Yes, that’s correct.

And to restate this in yet another way, say you have an S corporation tax return and it shows $100K of revenue and only three expenses: wages equal to $40K, employer FICA and Medicare equal to $3K, and an employer 401(k) profit sharing match equal to $10K.

Assume for sake of thoroughness that that $40K of wages includes $10K of self-employed health insurance…

In this case, the K-1 shows the business income equal to $100K-$40K-$3K-$10K, or $47K. And that $47K equals the qualified business income that plugs into the Section 199A calculations on your 1040.

In other words, you don’t need to adjust a second time for SE taxes, pension fund, SE health insurance, etc.

BTW, note that some of the things a sole proprietor or partner would need to adjust for — the self employed health insurance and the elective deferral — are “inside” that $40K wages figure.

Yes, but subject to luxury auto limits and substantiation rules.

Excellent coonentary on Sec 199A and I was so focused on the Regs. that I didn’t even think of looking in Pub. 535, However, when I was an exec. with NY’s State CPA Society, we used to get peeiodic complaints from members whose clients got in trouble with IRS for following their oen pubs. whose advice was different than the regs. So if the regs provide more specificity in a 199A area like service providerr reputation, I’d be confident going with the final 199Al reg. over Pub 535. Thanks again Walt

In regards to the thread on Section 199A Qualified Business Income Adjustments, I’m a little confused about the self employed retirement exclusion from QBI and wanted to confirm my understanding.

I have a single member S-Corp, and let’s stipulate that I’m a qualified business and below the threshold and all the other tests. Let’s say that among the deductions I am taking from $100K of gross income, I take a deduction of $10K for an employer contribution to a solo 401K. Totaling the deductions, I end up with a net $40K of Ordinary Business Income, which assuming I have a very simple income stream (which I do) should be $40K of QBI as I understand it.

What I wanted to double check is that as far as an S-Corp goes, since the self-employed retirement contribution has already been deducted from QBI in the process of calculating the net income that transfers to my K-1, I do not need to reduce my $40K of net income an additional $10K from the net (resulting in $30K of QBI).

That seems logical, but my head has started to spin slightly as March 15th approaches.

Thank you –