I think you might get Sec. 199A deduction… even if your taxable income is over phase-out range.

Someone selling insurance (so a one person operation) possibly is subject to the principal asset disqualification issue. Their income, arguably, stems principally from their efforts.

But someone who owns and operates an insurance agency where they and their team earn commissions, that would at first blush seem eligible.

To look at another industry, a real estate agent probably will potentially be subject to disqualification. But the person who owns the real estate brokerage office where the agent works? That person should still be eligible, I think.

BTW, regarding your numbers, remember that the qualified business income plugs into the formula but doesn’t really determine whether a business is subject to disqualification. Disqualification is based on the taxable income. A taxpayer with a $60K W-2 and a K-1 with $158K would get at least some Sec. 199A deduction no matter what… and might get a full Sec. 199A deduction.

Would Health Medicare Insurance Agency an S Corp be disqualified for 20% business income deduction? Is this profession considered a service? The insurance sold is 90% Medicare Health Plans. The government regulates all Medicare Insurance agents commissions. Agents can not charge for any additional services and all income is commission based.

The officer is taking W-2 salary at $60K annually and the S-corp income is $158K. Would is mean the 20% deduction would be phased -out?

Hi Sandy, I don’t know the specifics of the business you’re thinking about, but I would think a repair shop would be able to use the Sec. 199A deduction.

My logic goes like this: If an auto repair shop’s taxable income rises to the level where potentially the business needs to look at the specified service trade or business issue, the income probably isn’t flowing from a single person’s reputation or skill. Probably the income flows from a brand (like with an auto repair franchise) or from strong business model and clever process.

E.g,. the situation isn’t one that resembles the skill or reputation of JK Rowling, Eddie Van Halen or his band, or Dave Chapelle.

If you’re married and your taxable income (so income after all your business expenses, deductions for AGI, and itemized deductions) is over $415K, you possibly won’t.

Or, if you’re single and your taxable income is over $207,500, you possibly won’t.

A key element of your situation is that you’re paid by commission. That per the conference report makes a difference. The question is whether IRS will say you, Bill, are the principal asset.

I”ll be giving you guys a call. This has become to complicated. Thanks for the response.

No… not all of it. Your deduction won’t be 20% of the $182K though… it’ll be roughly 70% phased out.