Qualified Business Income

[44154415Kl]

Would I qualify for the QBI deduction?

I'm not sure if the following would be "treated as wages " by the IRS and therefore excluded from the deduction.  I did receive 1099-NEC's for all 3.

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[MinhT1 · Accepted solution]

Income reported on forms 1099-NEC is self-employed income, not wages.

Your net income from self-employment is Qualified Business Income (QBI) and makes you eligible for the QBI deduction.

[Mike9241]

you may be eligible.  there is a class of income for QBI purposes referred to as a Specified Service Trade or Business. There are more restrictions on this type of income for it to qualify for QBI. and you have to idicate this in Turbotax for the computations of the QBI deduction are correct'

an SSTB as we presently understand is defined as any trade or business involving the performance of services in the fields of:

Health
Law
Accounting
actuarial science
performing arts
consulting
athletics
financial services
brokerage services
any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners
any trade or business that involves:
investing and investment management
trading
dealing in securities (as defined in section 475(c)(2)),
dealing in partnership interests, or commodities

also in computing the QBI deduction, regardless of whether or not the activity is an SSTB, QBI income must be reduced by 1/2 the self-employment tax, contributions to related retirement plans and any other expenses related to the activity. 

[SF2]

I am reporting $3400 that I have received as self-employment income reported on 1099-NEC (for property management). However, TurboTax is not calculating any QBI deductions. Why isn't it eligible?

[KrisD15]

To clarify, 

are you filing Schedule C?

Did you answer the questions relating to QBI after entering the Self-Employment income? 

[SF2]

Yes, I am in the self-employment section. I define my business, and add the 1099-NEC info, then answer the questions related to QBI, that this work/service was not done outside the US, and I wasn't working for a former employee. Do you mean these questions?

[SF2]

I just learned that the deduction does not apply to self-employment tax! It only applies to federal income tax, and I am not paying any taxes other than self-employment, so I cannot take advantage of the deduction.

[AnnetteB6]

You are correct in your understanding.  The Qualified Business Income (QBI) deduction does indirectly affect the amount of Federal income tax that you may pay because it reduces your taxable income.  You can see the amount of QBI deduction on Form 1040 line 13.  

If the QBI deduction directly reduced your Schedule C business income, then the self-employment tax calculation would be reduced.  

@SF2 

[bleu-la]

Nonemployee Compensation (Form 1099-NEC

Nonemployee compensation is usually reported on a Form 1099-NEC. Enter this on the Your 1099-NEC or 1099-MISC Income screen.

The 1099-NEC is not e-filed to the IRS like a W-2 is. If you know where the 1099-NEC income should be reported and you don't have any federal or state tax withheld shown on the 1099-NEC, you could choose to skip entering the 1099-NEC and just enter the income directly on the income record. For example, enter income for a Schedule C .

Freetaxusa.com is much more detailed - Fed returns are free - you only pay for State which is approx $15.  It asks way more questions, so it is good if you have more detailed return than avg. person.  If you get 1099-you are better off w/the detailed system.  I have used it for over 4 years and one of the year was an audit revised.  IRS accepted the revised one from this site no problem

[bleu-la]

don't file as 1099-nec -just use business income schedule C section