Question

Jason and Paula are married. They file a joint return for 2020 on which they report taxable income before the QBI deduction of $274,500. Jason operates a sole proprietorship, and Paula is a partner in the PQRS Partnership. Both are a qualified trade or business, and neither is a "specified services" business. Jason's sole proprietorship generates $167,200 of qualified business income and W–2 wages of $50,000 and has qualified property of $20,000. Paula's partnership reports a loss for the year, and her allocable share of the loss is $33,100. The partnership reports no W–2 wages, and Paula's share of the partnership's qualified property is $11,200.

Assume the QBI amount is net of the self-employment tax deduction.

What is their QBI deduction for the year?

Answer 1

Jason and Paula's taxable income befor QBI deduction is $ 274500 .

Therefore , , W2 wages / capital investment limitation is not applicable to them .

Jason 's QBI amount = $ 167200 * 20% =  $ 33440

Paula's QBI amount = - 33100 * 20% = - 6620

Their combined qualified business income amount is $ 33440 + ( - 6620 )

Their combined qualified business income amount = $ 26820

The overall limitation based on the modified taxable income = $ 274500 * 20% = $ 54900

As $ 26820 is less than the overall limitation based on the modified taxable income i.e. $ 54900 , Their QBI deduction is $ 26820