Question

Jason and Paula are married. They file a joint return for 2020 on which they report taxable income before the QBI deduction of $247,000. 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 $173,200 of qualified business income and W–2 wages of $46,800 and has qualified property of $14,500. Paula's partnership reports a loss for the year, and her allocable share of the loss is $28,300. The partnership reports no W–2 wages, and Paula's share of the partnership's qualified property is $8,000.
Assume the QBI amount is net of the self-employment tax deduction.
What is their QBI deduction for the year?

Answer 1

Answer: $28940

Explanation:

Their QBI deduction for the year goes thus:

Jason's QBI amount will be:

= $173000 × 20%

= $173000 × 0.2

= $34600

Paula's QBI amount will be:

= $28,300× 20%

= ($5660)

Therefore, their combined qualified business income will be:

= $34600 - $5660

= $28940

The overall limitation which is based on th modified taxable income will be:

= $247000 × 20%

= $49400

Since $28940 is lesser than $49400, their QBI deduction for the year is $28940