Please provide a brief overview of how the 20% pass thru work for an S corp?

[kl123a]

Please provide a brief overview of how the 20% pass thru work for an S corp?  I file form 1020 and after paying myself with a W2, I have remaining profit in K1. Where do I get the 20% tax benefit? I don't see it in 1020 and K1. Do I see it in 1040? How do I claim it? The 20% tax benefit is 20% off my K1 or my income reported in 1020?

[DanielV01]

The potential 20% QBI deduction is on the pass-through income reported on Schedule K-1.  Your wages that you pay yourself do not qualify for the QBI deduction.  But, since you are an S-Corp, it is imperative that you are paying yourself reasonable compensation through wages and salaries (as reported on Form W-2).  This is because the pass-through income from the S-Corp to you is not taxed at the corporate level (as is the case with a C Corp), but rather on your personal tax return (Form 1040).  Also, this pass-through income is not subject to Social Security and Medicare tax (which are the two main appeals of S Corp status).  The QBI deduction is calculated and taken on Line 9 of Form 1040 (Individual tax return).

This deduction is anything but automatic (very complicated calculation).  Still, if you are using the filing status of Married Filing Joint (or Qualifying Widow/Widower), you will be entitled to the full 20% deduction of QBI calculated if your Adjusted Gross Income is $315,000 or less.  With any other filing status, the threshold is $157,500.  

If you are over the threshold, how much QBI deduction you may receive will depend on whether you are a Specialty Services Trade or Business (SSTB) or not and other factors.  If you are over the threshold amounts and wish more information, please comment.

Also, you may find the following FAQ also helpful:  https://ttlc.intuit.com/replies/7019998

[kl123a]

I use Turbo for Corporation to generate K-1 for my SCorp to be entered in TurboTax Home and Business for my personal income. I pay myself with W2 with the SCorp. The remaining profit is in a K-1. The K-1 has codes A, V and W in box 17. I would like to know why the QBI is not populated to line 9 of form 1040 in TurboTax Home and Business. My 1040 has less than $300K income. It appears the only way I can claim QBI is to take 20% of the amount under code V in K-1 and enter the amount on line 9 of form 1040. Is this valid since I can't figure out a way for the QBI to populate in 1040 by Turbo Tax.I updated TurbTax Home and Business today 3/2/2019 and entered my K-1 into TurboTax today.

The second question I have is how to claim QBI in my Georgia State income tax? Does Georgia allow 20% reduction of the income in K-1? After I manually entered an amount on line 9 of 1040, there is no reduction in Georgia income tax.