Dear [CLIENT NAME]:

Business owners, landlords, and those who invest in real estate investment trusts (REITs) and publicly-traded partnerships (PTPs) may be eligible to claim the qualified business income (QBI) deduction (aka, the IRC §199A deduction). The QBI deduction provides taxpayers a deduction of up to 20% of their business or rental income, but only if certain requirements are met.

If you receive income reported from any of the following sources, you may qualify for this 20% deduction:

• Sole proprietorship business (including statutory employees);
• S corporation;
• Partnership or limited liability company (LLC);
• Real estate investment trust (REIT);
• Publicly traded partnership (PTP);
• Estate or trust;
• Rental property; or
• Farm or fishing boat.

However, income you receive as an employee and reported on Form W-2 is not eligible (except for statutory employees), nor are guaranteed payments received by a partner or investment income, such as interest, dividends (other than REIT dividends), and capital gains, even if they are received from one of the business entities listed above.

There are many other rules and limitations that accompany the qualified business income deduction, particularly for rental properties, but there are also many planning strategies we can employ to help you maximize this very valuable deduction.

The best tax planning is done as far in advance as possible. Please do not hesitate to contact us as soon as possible with any questions so we can get a jump start on maximizing your qualified business income deduction.

Sincerely,

Your tax professional