Question

Marcia, a single individual, has qualified trade or business income after all applicable deductions of $240,000. Her business paid $80,000 of W-2 wages this year and has $50,000 of tangible business property. Required: Compute Marcia's QBI deduction, assuming her overall taxable income before QBI is $300,000. Compute Marcia's QBI deduction, assuming her overall taxable income before QBI is $180,000.

Answer 1

Answer:

Compute Marcia's QBI deduction, assuming her overall taxable income before QBI is $300,000.

• $40,000

Compute Marcia's QBI deduction, assuming her overall taxable income before QBI is $180,000.

• $36,000

Explanation:

Marcia's QBI deduction limits:

lower between 20% of QBI or taxable income

$240,000 x 20% = $48,000

$300,000 x 20% = $60,000

or

higher between 50% of wages or 25% of wages + 2.5% of business property

$80,000 x 50% = $40,000

($80,000 x 25%) + (2.5% x $50,000) = $21,250

Marcia's QBI deduction limits:

lower between 20% of QBI or taxable income

$180,000 x 20% = $36,000

$300,000 x 20% = $60,000

or

higher between 50% of wages or 25% of wages + 2.5% of business property

$80,000 x 50% = $40,000

($80,000 x 25%) + (2.5% x $50,000) = $21,250