Tammy, a single taxpayer, has a part-time job at BigCo, a company in which she has no ownership interest. In addition, she owns and operates LittleCo, a sole proprietorship that is a qualified trade or business. Tammy is paid wages of $40,000 by BigCo, and reports $100,000 in qualified business income from LittleCo. She has no other items of income or loss and $25,000 of itemized deductions.
What is her qualified business income deduction?
Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity. Individuals, trusts and estates with qualified business income, qualified REIT dividends or qualified PTP income may qualify for the deduction. QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business. The deduction shall be % of QBI.
Accorsingly, Tammy shall get deduction of 20% of $ 100,000 = $ 20,000
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