Jason and Paula are married. They file a joint return for 2021 on which they report taxable income before the QBI deduction of $294,500. Jason operates a sole proprietorship, and Paula is a partner in the PQRS Partnership. Both are a qualified trade or business, and neither is a "specified services" business. Jason's sole proprietorship generates $172,000 of qualified business income and W–2 wages of $47,200 and has qualified property of $17,000. Paula's partnership reports a loss for the year, and her allocable share of the loss is $26,500. The partnership reports no W–2 wages, and Paula's share of the partnership's qualified property is $11,200. Assume the QBI amount is net of the self-employment tax deduction. What is their QBI deduction for the year?
Jason and Paula are married. They file a joint return for 2021 on which they report taxable income before the QBI deduction of $294,500. Jason operates a sole proprietorship, and Paula is a partner in the PQRS
Assume the QBI amount is net of the self-employment tax deduction.
What is their QBI deduction for the year?
Calculation of QBI Deduction
Explanation
Taxable income is below phaseout range i.e $321400
Therefore , QBI is lesser of following
Step 1 : QBI deduction without any limit = 20% of Net income
= 20 % x (%172000 - $26500)
= $29100
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