Deduction for Qualified Business Income (Pass-Through Entity Deduction). For 2018, an individual taxpayer generally may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship, as well as 20% of aggregate qualified REIT dividends, and qualified publicly traded partnership income. In the case of a partnership or S corporation, the deduction applies at the partner or shareholder level. Special rules apply to specified agricultural or horticultural cooperatives. A limitation based on Form W-2 wages and capital gain is phased in when the taxpayer’s taxable income exceeds a $157,500 ($315,000 MFJ) threshold amount. A disallowance of the deduction with respect to specified service trades or businesses is also phased in when taxable income exceeds the threshold amount. These limitations are phased-in if taxable income exceeds the threshold amount but is below $207,500 ($415,000 MFJ) (the phase-in range). For purposes of this provision, taxable income is computed without regard to the 20% deduction.
Depreciation Luxury Auto Depreciation Limits. For 2018, the new law increases the depreciation limitations under IRC section 280F that apply to listed property. For passenger automobiles placed in service after December 31, 2017, and for which bonus depreciation under IRC section 168(k) is not claimed, the maximum amount of allowable depreciation is $10,000 for the year in which the vehicle is placed in service, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years in the recovery period. The limitations are indexed for inflation for passenger automobiles placed in service after 2018. The provision removes computer or peripheral equipment from the definition of listed property. Such property is therefore not subject to the heightened substantiation requirements that apply to listed property.