Section 199A Further Guidance: What It Means to Farmers

Section 199A is one of the more contentious areas of the Tax Cuts and Jobs Act. In response to speculation about what the items in Section 199A involve, the IRS released proposed regulations for further guidance. Author Paul Neiffer, in a recent article for Ag Web, offered a quick summary of the Section 199A Guidance, as it pertains to the farm industry.

The IRS’s further guidance offered clarification in the following areas:

  • Farmers who own their farmland but farm it under another entity can combine their rental and farm income;
  • Farms with multiple entities can continue to allocate wages as they were under the old regulations;
  • Carryover losses incurred prior to 2018 do not have to be included when calculating income that qualifies for the 20% deduction;
  • Section 1231 gains will qualify as ordinary income, not business income, and will therefore count towards QBI; and
  • Restructuring partnership and/or operating agreements to circumvent the guaranteed payment limitation is discouraged.

Keep in mind that, since these are simply proposed regulations, the above is subject to change.

To learn more, visit Ag Web. De Boer, Baumann & Company has a specialized team of professionals with extensive experience assisting agricultural businesses. Contact one of our team members today for a consultation.