Question

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?

Answer 1

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