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qualified property from the qualified trade or business. The partial or full reduction to QBI is determined by your taxable income. If your tax- able income (before the QBI deduction) is: • At or below the threshold, you don’t need to reduce your QBI, • Above the threshold but below the phase in range, the reduction is phased-in, • Above the threshold and phase in range, the full reduction applies. In addition, if you are a patron of an agricul- tural or horticultural cooperative you must re- duce your cooperative QBI by the lesser of: • 9% of the QBI allocable to qualified pay- ments, or • 50% of W-2 wages from the trade or busi- ness allocable to the qualified payments. Determining your qualified trades or busi- nesses. Your qualified trades and businesses include your section 162 trades or businesses, other than trades or businesses conducted through a C corporation, W-2 wages earned as an employee, and specified service trades or businesses. In general, to be engaged in a trade or busi- ness, you must be involved in the activity with continuity and regularity and your primary pur- pose for engaging in the activity must be for in- come or profit. If you own an interest in a pass-through entity, the trade or business de- termination is made at that entity's level. The ownership and rental of real property may constitute a trade or business. Notice 2019-07 provides a safe harbor under which rental real estate enterprise will be treated as a trade or business for purposes of the QBI de- duction. For more information, on the safe har- bor see Notice 2019-07. Rental real estate that does not meet the requirements of the safe har- bor may still be treated as a trade or business for purposes of the QBI deduction if it is a sec- tion 162 trade or business. In addition, the rental or licensing of property to a commonly controlled trade or business op- erated by an individual or a pass-through entity is considered a trade or business under section 199A. Services performed as an employee exclu- ded from qualified trades or businesses. The trade or business of performing services as an employee is not a trade or business for pur- poses of section 199A. Therefore, any amounts reported in box 1 of Form W-2, other than amounts reported in box 1 where the “Statutory Employee” box in box 13 is checked, are not QBI. If you were previously an employee of a business and continue to provide substantially the same services to that business after you are no longer treated as an employee, there is a presumption that you are providing services as an employee for purposes of section 199A for the 3-year period after ceasing to be an em- ployee. You may have to rebut this presumption upon notice from the IRS by providing records such as contracts or partnership agreements that corroborate your status as a non-em- ployee. For more information on whether you are an employee or an independent contractor, see Pub. 15-A, Employer’s Supplemental Tax Guide, and Pub. 1779, Independent Contractor or Employee. Specified service trade or business exclu- ded from your qualified trades or busi- nesses. Specified service trades or busi- nesses generally are excluded from the definition of qualified trade or business income if the taxpayer's taxable income exceeds the threshold. Therefore, no QBI, W-2 wages, or UBIA of the qualified property from the specified trade or business are taken into account in fig- uring your QBI deduction. If the specified serv- ice trade or business is conducted by your pass-through entity, the same limitation applies to the pass-through items regardless of whether you are a passive owner or materially partici- pate in the business. Exception 1: If your taxable income before the QBI deduction isn’t more than $157,500 ($315,000 if married filing jointly), your specified service trade or business is a qualified trade or business, and thus may generate income eligi- ble for the QBI deduction. Exception 2: If your taxable income before the QBI deduction is more than $157,500 but not $207,500 ($315,000 and $415,000 if mar- ried filing jointly), an applicable percentage of your specified service trade or business is trea- ted as a qualified trade or business. For more information on the applicable percentage and this exception, see the instructions for Sched- ule A in this publication. A specified service trade or business is any trade or business providing services in the fields of: • Health, including physicians, nurses, den- tists, veterinarians, physical therapists, psychologists, and other similar healthcare professionals. However, it excludes serv- ices not directly related to a medical serv- ices field, such as the operation of health clubs or spas; payment processing; or the research, testing, manufacture, and sale of pharmaceuticals or medical devices; • Law, including lawyers, paralegals, legal arbitrators, mediators, and similar profes- sionals. However, it excludes services that do not require skills unique to the field of law such as services by printers, delivery services, or stenography services; • Accounting, including accountants, enrol- led agents, return preparers, financial audi- tors, and similar professionals; • Actuarial science, including actuaries, and similar professionals; • Performing arts, including actors, directors, singers, musicians, entertainers, and simi- lar professionals. However, it excludes services that don’t require skills unique to the creation of performing arts, such as the maintenance and operation of equipment or facilities for use in the performing arts or the provision of services by persons who broadcast video or audio of performing arts to the public; • Consulting, including providing advice and counsel with the intention of influencing decisions made by a government or gov- ernmental agency and all attempts to influ- ence legislators and other government offi- cials on behalf of a client by lobbyists, and other similar professionals. However, it ex- cludes the performance of services other than advice or counsel, such as sales, training or educational courses. It also ex- cludes embedded or ancillary services that are otherwise not SSTBs, if there is no separate payment for the services; • Athletics, including athletes, coaches, and managers in sports such as baseball, bas- ketball, football, soccer, hockey, martial arts, boxing, bowling, tennis, golf, snow- boarding, track and field, billiards, racing, and other athletic performance. However, it excludes services that do not require skills unique to athletic competition, such as the maintenance and operation of equipment or facilities for use in athletic events or the provision of services by per- sons who broadcast video or audio of ath- letic events to the public; • Financial services, including managing wealth, advising clients with respect to fi- nances, developing retirement plans, de- veloping wealth transition plans, the provi- sion of advisory and other similar services regarding valuations, mergers, acquisi- tions, dispositions, restructuring (including in title 11 or similar cases), and raising fi- nancial capital by underwriting, or acting as a client’s agent in the issuance of secur- ities, and similar services. This includes services provided by financial advisors, in- vestment bankers, wealth planners, retire- ment advisors, and other similar professio- nals. However, it excludes taking deposits or making loans, but does include arrange lending transactions between a lender and borrower; • Brokerage services, including services in which a person arranges transactions be- tween a buyer and a seller with respect to securities for a commission or fee includ- ing services provided by stock brokers and other similar professionals. However, it ex- cludes services provided by real estate agents and brokers, or insurance agents and brokers; • Investing and investment management, in which a fee is received for providing invest- ing, asset management, or investment management services, including providing advice with respect to buying and selling investments. However, it excludes the service of directly managing real property; • Trading, including the trade or business of trading in securities (as defined in section 475(c)(2)), commodities (as defined in section 475(e)(2)), or partnership interests; • Dealing in securities, including dealing in securities (as defined in section 475(c)(2)), commodities (as defined in section 475(e) (2)), or partnership interests; • Any trade or business where the principal asset is the reputation or skill of one or more of its employees, as demonstrated by:

– Receiving fees, compensation, or other income for endorsing products or services;

– Licensing or receiving fees, com- pensation or other income for the use of an individual’s image, likeness, name, signature, voice, trademark, or any other symbols associated with the individual’s identity; or

– Receiving fees, compensation, or other income for appearing at an event or on radio, television, or an- other media format. Page 50 Chapter 12 Qualified Business Income Deduction