The Tax Cuts and Jobs Act of 2017 (TCJA) includes several changes for farmers and ranchers. Here is how the new Qualified Business Income Deduction (QBID) affects farmers and ranchers.

The new law provides a 20 percent deduction for “qualified business income,” defined as income from a trade or business conducted within the U.S. by a partnership, S corporation, or sole proprietorship. Excluded from the QBID is investment items (like capital gain from the sale of breeding stock), reasonable compensation paid by an S corporation, and guaranteed payments from a partnership. The deduction reduces taxable income, but not adjusted gross income or self-employment tax.

Please also note these. The calculation of QBID is more complex when joint filers report taxable income above $315,000. And, flow-through deduction from cooperatives (formerly, domestic production activities deduction) remains deductible.

With over 20 years of experience in public accounting, Amanda Bechen CPA owns Bechen & Company PC located in Wagner, SD, and can be contacted at 605-384-4200 or www.bechenco.com.