Section 199A of the Internal Revenue Code was created by the Tax Cuts and Jobs Act (TCJA) signed into law in 2017. A provision of the law provides for a 20% deduction for so-called “qualified business income” (“QBI”). If a taxpayer can utilize the new law, the taxpayer can save a bundle in taxes. However, an American living abroad would most likely NOT be able to use the QBI deduction.
The way the tax law defines QBI usually means “tough luck” for the American abroad because QBI does not include income from non-US sources. In short, the income must be earned within the US in order to qualify as QBI. So, for the typical American abroad who is running a business overseas, or who is investing in a foreign partnership or a foreign rental property “trade or business” is likely out of luck – no QBI deduction will be available.
Of course, all situations are different. Many American expats are living abroad, but are running truly international business activities, especially during these times of global connectivity and remote work.
JRosio Tax is here to help get it all figured out.
