QBI update: IRS draft contradicts prior guidance on real estate, insurance brokers as SSTBs

December 28, 2018

The IRS has issued a draft form (Publication 535) that directly contradicts proposed regulations provided this past August, specifically lumping real estate agents and brokers as well as insurance agents and brokers with all other “brokerage services” as Specified Service Trade or Business (SSTB). Furthermore, it extends the definition of brokerage services to any income sourced from “arranging transactions between a buyer and a seller for a commission or fee.” Recall that income from an SSTB is not allowed any of the 20% deduction if the owner’s taxable income exceeds $415,000 for married-filing-joint and $207,500 for all other filers. Please note IRS Publications are not authoritative and do not take precedent over the proposed regulations. That said, it is imperative to stay aware of changes to interpretation as tax season approaches. Unfortunately, there is no definitive guidance as to when final regulations will be issued. For questions on how this update may affect you, contact your account manager or call 888-556-0123.