To set the stage, the 199A deduction is only limited if you are above the income threshold of $315,000 for married filing joint and $157,500 for all other taxpayers. If your income is under these amounts, you get the full 20% deduction, if your business qualifies.
The basis of qualifying property is calculated as the unadjusted basis immediately after acquisition of that property. Qualifying property means (1) tangible, (2) depreciable property (3) held by, and available for use in, the business at the close of the tax year, (4) used in the production of QBI (qualified business income) at any time during the year, and (5) for which the "depreciable period" has not ended before the close of the tax year (Sec. 199A(b)(6)).
The depreciable period starts on the date the property is first placed in service and ends on the later of (1) 10 years after the beginning date, or (2) the last day of the last full year of the applicable recovery period under Sec. 168 (ignoring Sec. 168(g)). This rule allows "qualified property" to include property that has exhausted its modified accelerated cost recovery system (MACRS) depreciation period if it is still in its first 10 years of service.
Once this amount is determined, 2.5% of the unadjusted basis of the qualified property is used in one of the 199A limitation calculations.
Note: The IRS recently clarified that the unadjusted basis of qualified property is determined before any bonus depreciation or Section 179 expensing.
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