Question

Thad, a single taxpayer, reports taxable income before the QBI deduction of $195,500. Thad, a CPA, operates an accounting practice as a single member LLC (which he reports as a sole proprietorship). During the tax year, his proprietorship generates qualified business income of $156,400 after deducting self-employment taxes, W–2 wages of $117,300, and $10,000 of qualified property.

Assume the QBI amount is net of the self-employment tax deduction. If required, round any division to two decimal places. Round your final answer to the nearest dollar.

What is Thad's QBI deduction?

Answer 1

Particulars	Amount	Amount	Amount
(1) First limit:
Qualified business income		$      156,400
X applicable percent		20%
QBI limit		$        31,280	$        31,280
(2) Overall limit:
Modified taxable income		$      195,500
X applicable percent		20%
Modified taxable income limit		$        39,100	$        39,100
(3) W-2 wages/ investment limit:
Amount is higher of:
(a) W-2 wages		$      117,300
X applicable percent		50%
W-2 wages limit		$        58,650
(b) Capital investment limit:
Unadjusted basis of assets	$        10,000
X applicable percent	2.50%
Result A	$             250	$             250
W-2 wages	$      117,300
X applicable percent	25%
Result B	$        29,325	$        29,325
Result A plus Result B		$        29,575
(3) Higher of (a) and (b)			$        58,650
QBI Deduction Lesser of (1), (2), and (3)			$        31,280

Answer is:

31,280