Margarita operates a sole proprietorship that earns$ 100,000 of qualified business income after deducting salaries of$ 300,000. The sole proprietorship is not a specified service business. She files a single tax return for 2020. Assume her taxable income before the
QBI deduction is$ 175,000. Margarita's QBI deduction for 2020 is:
a. $-0-.
b. $20,000.
c. $35,000.
d. $60,000.
e. $80,000.
Income of Margarita is in excess of the limit defined for "Single" (assumed) tax filers of $ 163300.
Therefore th QBI deduction will be the lower of -
(Note since asset details are not avaialble 25% of W-2 wages plus 2.5% of the unadjusted basis of all qualified property portion option ignored)
With ofcoure overall ceiling of 20% of taxable income without the QBI deduction i.e. 20%*175000 = 35000
20% of QBI = 20%*100000 = 20000
50% of W-2 wages = 50%*300000=150000
Lower of the above is 20000 and the same is also below overall limit of 35000.
Margarita QBI deduction therefore is 20000 (option b)
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