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Old 03-09-2018, 04:53 PM
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Join Date: Mar 2016
Posts: 3
Question New QBI (Qualified Business Income) deduction

It looks like I'll be able to deduct 20% of my taxable sole-proprietorship income with the new QBI deduction.

Do I apply that 20% before or after other deductions, including the standard deductions? I've read a bunch of the web pages out there, and this still isn't clear to me.

Currently my simple taxes look like this:
  • Net business income
  • Less deductible half of self-employment tax
  • Less contribution to SEP-IRA
  • Equals AGI
  • Less standard deduction
  • Equals taxable income

Where in this list do I get to insert the QBI deduction? This is relevant for the estimated taxes that I'll start paying in April.

Thank you!



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Old 03-10-2018, 08:45 AM
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Join Date: Oct 2010
Posts: 5,113
Do I apply that 20% before or after other deductions, including the standard deductions? I've read a bunch of the web pages out there, and this still isn't clear to me.===========>you usually need to fuile Sch C of 1040 aslongas the amt on SCh C of 1040 line 29 / 31 is $400 or higher and also need to pay self employment tax aslongas the amt on Sch SE of 1040 line 2 / 3 is also $400 or higher; However as you can see you may claim your ONLY biz related expenses on your Sch C of 1040. The 2017 tax reform includes a fantastic tax benefit for many self-employed individuals,allowing them to deduct 20% of their business income.
Currently my simple taxes look like this:
? Net business income===>this one from line 29 / 31 of Sch C of 1040 needs to needs to be reported on line 12 of 1040
?
?
?
? Less deductible half of self-employment tax============>and yiu need to claim this one on 1040 line 27
? Less contribution to SEP-IRA======>can be claimed on 1040 line 32
? Equals AGI===>Correct reported on 1040 line 37/ 38.
? Less standard deduction=======>reported on line 40
? Equals taxable income========>Correct reported on 1040 line 43.


Before; say, you as a sole biz owner make $300K in profit and you file jointly. Then you are able to deduct 20%ofyour QBI deduction , I mean 20% oof your profit, in this case $60K;20%*$300K, from your tax return. So even before any other deductions or the standard deduction, you re taxed on not $300K, but $300K less 60K for a taxable income of $240K.



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Old 03-10-2018, 06:11 PM
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Join Date: Mar 2016
Posts: 3
Thanks for your reply. I'm concerned that it's not this simple. Multiple accounting web sites claim that the deduction is the LESSER of 20% of QBI, or 20% of TAXABLE INCOME. Naturally in my case taxable income is less than net business income.

Here are 2 representative sites that mention this:
https://www.watsoncpagroup.com/section-199a-deduction/
https://www.bnncpa.com/resources/lib..._thru_entities

That's why I'm asking, where in my simple tax calculation I "insert" this new QBI deduction:
  • Net business income
  • Less deductible half of self-employment tax
  • Less contribution to SEP-IRA
  • Equals AGI
  • Less standard deduction
  • Equals taxable income

Thank you!

-Doug



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Old 03-11-2018, 09:21 AM
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Join Date: Oct 2010
Posts: 5,113
Quote:
Originally Posted by dlaudenschlager View Post
Thanks for your reply. I'm concerned that it's not this simple. Multiple accounting web sites claim that the deduction is the LESSER of 20% of QBI, or 20% of TAXABLE INCOME. Naturally in my case taxable income is less than net business income.

Here are 2 representative sites that mention this:
https://www.watsoncpagroup.com/section-199a-deduction/
https://www.bnncpa.com/resources/lib..._thru_entities

That's why I'm asking, where in my simple tax calculation I "insert" this new QBI deduction:
  • Net business income
  • Less deductible half of self-employment tax
  • Less contribution to SEP-IRA
  • Equals AGI
  • Less standard deduction
  • Equals taxable income

Thank you!

-Doug
as yo can see you taxable icnoem on 1040 is lesser than the amt reported on Sch C on line 29 / 31 due to deductions on 1040 as mentioned previously; Qualified items? do not include specified investment-related income, gain, deductions, or loss; for example, items of gain taken into account in determining net long-term capital gain, dividends, and interest income other than that which is properly allocable to a trade or business are not included; nor are items of deduction or loss allocable to such income. You are allowed a deduction for any taxable year of an amount equal to the lesser of:
Your ?combined QBI amount? for the taxable year, or an amount equal to 20% of the excess (if any) of
Ypur taxable income for the taxable year, over any net capital gain for the taxable year.I guess you need to contact an IRS Enrolled Agent/a CPA doing taxes in your local area fr your fed/stat returns.



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