The definition of the 20% credit as I understand it is 20% of the qualified business income after deducting all business expenses. TurboTax is calculating the credit after deducting the standard deduction. What is correct?
It is correct.
The 20% QBI deduction calculation compares the difference between 20% of the QBI (your Schedule C net income, minus any other deductions attributable to your Schedule C income, which encompasses deductions such as the solo 401K deduction, Self-Employed Health Insurance Deduction attributable to the business, and 1/2 of SE tax being deducted on your return) and 20% of *taxable* income minus capital gains. Whichever amount is lower is the QBI deduction.
[Edited 2/22/2019 [11:20]
It is correct.
The 20% QBI deduction calculation compares the difference between 20% of the QBI (your Schedule C net income, minus any other deductions attributable to your Schedule C income, which encompasses deductions such as the solo 401K deduction, Self-Employed Health Insurance Deduction attributable to the business, and 1/2 of SE tax being deducted on your return) and 20% of *taxable* income minus capital gains. Whichever amount is lower is the QBI deduction.
[Edited 2/22/2019 [11:20]
Actually, it's 20% of *taxable* income minus capital gains, not 20% of AGI. Taxable income is AGI minus the standard deduction or itemized deductions, so if you don't have other ordinary income of at least the amount of the standard deduction, the standard deduction will reduce your QBI deduction.
Thank you for the responses. I have never seen it explained that way.