# Qualified business income deduction: does it apply to royalties?



## Greg (Mar 26, 2019)

My tax accountant said the 20% pass through QBI deduction doesnt apply to music royalties, even if they are directly from my business. 

Cant find any info online about this. Curious if anyone had a different opinion from their tax prep?

It doesnt make sense to me that the royalty income isnt considered qbi..


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## dzilizzi (Mar 26, 2019)

Royalty income is generally considered passive income by the IRS. There may be a way that it is considered active income, but I think that you would have to be in the business of managing the music. 

Similar to rental income or dividends. If you are in the business of managing it, you can deduct related expenses plus normal business expenses. Passive income, you can only deduct expenses related to tracking and collecting it. And it is limited.

Edit - I should say this is U.S. IRS so other countries laws may vary.


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## Greg (Mar 26, 2019)

dzilizzi said:


> Royalty income is generally considered passive income by the IRS. There may be a way that it is considered active income, but I think that you would have to be in the business of managing the music.
> 
> Similar to rental income or dividends. If you are in the business of managing it, you can deduct related expenses plus normal business expenses. Passive income, you can only deduct expenses related to tracking and collecting it. And it is limited.
> 
> Edit - I should say this is U.S. IRS so other countries laws may vary.



Interesting, been doing more research and it seems like if you engage in music as a business at all then everything should be on schedule C. Now I wonder if it matters if you're the publisher or not?


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## dzilizzi (Mar 26, 2019)

Greg said:


> Interesting, been doing more research and it seems like if you engage in music as a business at all then everything should be on schedule C. Now I wonder if it matters if you're the publisher or not?


The IRS doesn't actually care what you do. But I would think a publisher's royalties would definitely be business income for schedule C. As a writer or performer, it may or may not be depending on how active you are in the business.


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