Question

Scott and Laura are married and will file a joint tax return. Scott has a sole proprietorship (not a "specified services" business) that reports net income of $300,000. The proprietorship pays W–2 wages of $40,000 and holds property with an unadjusted basis of $10,000. Laura is employed by a local school district. Their taxable income before the QBI deduction is $375,000 (this is also their modified taxable income).

What is their tentative QBI based on the W–2 Wages/Capital Investment Limit? Determine their allowable QBI deduction.

Answer 1

It is important to note that QBI deduction is limited to 20% of the taxable income accordingly, the following calculations have been made:

Particulars	Amount ($)
Tentative QBI
Net income	300,000.00
Add: Wages	40,000.00
	340,000.00
QBI rate	20%
Tentative QBI (340000 x 20%)	68,000.00
Allowable QBI
Total taxable income before WBI deduction	375,000.00
Allowed QBI deduction	20%
QBI deduction (375000 x 20%)	75,000.00