Question

Evan, a single individual, operates a service business that earned $110,000 in 2020. The business has no tangible property and paid no W-2 wages.

Required:

1. Compute Evan's QBI deduction, assuming his overall taxable income before QBI is $125,000.
2. Compute Evan's QBI deduction, assuming his overall taxable income before QBI is $175,000.

Answer 1

FOR SINGLES IF TAXABLE INCOME less than are equal to 157500 Hence the deducation

Operates a service business that earned = $110,000

A) Calculating Evan's QBI deduction, assuming his overall taxable income before QBI is= $125,000

Taxable income percenatge = 20%

Taxable income before QBI x Taxable income percenatge

= $125,000 x 20%

=  $125,000 x 0.20

=$25,000

Operates a service business that earned x QBI 20% = $110,000 x 20%

= $110,000 x 0.20

= $22,000

b) Calculating Evan's QBI deduction, assuming his overall taxable income before QBI is $175,000

FOR SINGLES IF TAXABLE INCOME GRATERETHAN 157500 BUT BELOW 207,500 HENCE THE DEDUCTION WILL BE

50% OF WAGES=0

20%OF QBI (175000-157500)/(50,000)*(110000*20%)

= 17,500 / (50,000)*(110000*20%)

17,500 / (50,000)*22,000

=$14,300

20% OF TAXABLE INCOME(175,000*20%)=$35,000

ANSWER 14,300

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