Question

In 2018, Meghann Carlson, a single taxpayer, has QBI of $118,600 and modified taxable income of $83,020 (this is also her taxable income before the QBI deduction). Given this information, what is Meghann's QBI deduction?

Answer 1

Calculation of Meghann'sMeghann's QBI Deduction

Given details:

Meghann Carlson is a single taxpayer

Qualified Business Income (QBI) =$118,600

Modified Taxable Income =$83020 ( this is also her Taxable vIncome before QBI Deduction)

Here, Meghann is a single taxpayer and her Taxable Income is $83,020 which is below of threshold amounts under QBI Deduction($157,500 for all other taxpayer s than married or joint payers). So, the QBI Deduction will be lesser of the following;

a)20%of Meghann's Qualified Business Income (QBI) = 20% of $118,600

= $23,720

b)20%of Meghann's Modified Taxable Income (Taxable Income minus net capital gains) . = 20 %of $ 83,020

= $ 16,604

Therefore, Meghann's Qualified Business Income (QBI) Deduction is "$16,604". Since, 20%of Meghann's Modified Taxable Income ($16,604) is less than 20% of Meghann's Qualified Business Income ($23,720)

Explanation:Under the section 199A Internal Revenue Code, Deduction for Qualified Business Income, the deduction was created by the 2017 Tax Cuts and Jobs Act says, if a taxpayer's Taxable Income is below $315,000 for a married couple filling a joint return and $157,500 for all other taxpayer s; the Qualified Business Income deduction is lesser of the following:

a)20 percent of the taxpayer's QBI, plus 20 percent of the taxpayer's qualified real estate investment trust (REIT) dividends and qualified publicly traded partnerships (PTP) income

b)20 percent of the taxpayer's Taxable Income minus net capital gains.