Question

Joseph and Rachel are married and earn $220,800 a year, which includes $90,800 in wages from Joseph’s job managing a theater, and $130,000 of net income from Rachel’s clothing store (which is simply a sole proprietorship business reported on her Schedule C). In addition, the couple has a $150,000 portfolio, that produced $3,000 of qualified dividends and $2,000 of real estate investment trust (REIT) income in the past year. The couple’s total income is $225,800, of which $132,000 (including Rachel’s business income and the REIT income) is qualified business income (QBI). In 2020, the couple will be eligible for a $24,800 standard deduction, reducing their $225,800 of income down to only $201,000. In addition, they will receive a qualified business income (QBI) deduction for what amount? A. $0 B. $13,200 C. $26,400 D. $52,800

Answer 1

From the information given about the income, the deduction for the qualified business Income will be C. $26400.

How to calculate the deduction

From the information given, it was stated that the couple’s total income is $225,800, of which $132,000 including Rachel’s business income and the REIT income is qualified business income.

Therefore, the amount for the qualified business income deduction will be:

= Qualified business Income × Deduction

= $132000 × 20%

= $26400

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