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Susan, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is...

Susan, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is not a specified services business. In 2020, the business pays $60,000 in W-2 wages, has $150,000 of qualified property, and $200,000 in net income (all of which is qualified business income). Susan also has a part-time job earning wages of $13,600, receives $3,400 of interest income, and will take the standard deduction. What is Susan’s qualified business income deduction?

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Expert Solution

TAXABLE INCOME OF SUSAN-=
Qualified business income $2,00,000.00
other income
part time wages 13600
interest income 3400 $17,000.00
AGI $2,17,000.00
Less standard deduction $12,400.00
Taxable income $2,04,600.00
Since Susan is a single filer and her taxable income is more than limit thus Susan will not get exact 20% of QBI as deduction
Susan can claim lower of following (w-2 wages =$60000 and qualified property$150000
1. 50% of W-Wages 30,000.00 $
2. 20% of w-wages+2.5% of qualified property which ever is more
20% of 60000+2.5% of 150000
15750
Susans qualified income deduction= $30000

ekkarill92 answered 1 year ago
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