Question

Roquan, a single taxpayer, is an attorney and practices as a sole proprietor. This year, Roquan had net business income of $90,000 from his law practice (net of the associated for AGI self-employment tax deduction). Assume that Roquan pays $40,000 in wages to his employees, has $10,000 of property (unadjusted basis of equipment he purchased last year), and has no capital gains or qualified dividends. His taxable income before the deduction for qualified business income is $100,000. (Leave no answer blank. Enter zero if applicable.) Required: Calculate Roquan’s deduction for qualified business income. Assume the same facts provided above, except Roquan’s taxable income before the deduction for qualified business income is $300,000.

Answer 1

Answer:

a) Calculate Roquan’s deduction for qualified business income.

qualified business deduction:

• 20% of qualified business income AND less than 20% of total income
• Since Roquan is a single filer, his AGI cannot exceed $213,300.

Roquan's QBI deduction = 20% x QBI = 20% x $90,000 = $18,000

b) Since Roquan's income is higher than $213,300, then he is not allowed any QBI deduction.