Tax Year Prior to 2020: QBI Deduction

Forum|Forum|7 years ago
March 31, 2019
1 reply
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Hello,

I have a consulting business that does not qualify for the QBI deduction unless we meet the $315k income threshold. My consulting business produces income less than this amount. What I would like some input on is does investment income and/or capital gains get added to your income threshold as I sold a second home and had a rather large capital gain that in combination with my consulting income would put me over the threshold. Thanks for your help.

KarenL

Employee Tax Expert

It's actually the opposite of what you said in your first sentence. Your consulting business does qualify for QBI unless you exceed the threshold amount. Please see below and this link for more details.

The specified service trade or business (SSTB) classification doesn’t come into play as long as total taxable income is under $157,500 ($315,000 if filing jointly). At higher income levels, the deduction for SSTBs is reduced and in some cases, eliminated.

For the purposes of the QBI deduction, an SSTB is defined as any trade or business that performs services in the fields of:

Accounting
Actuarial science
Athletics
Consulting
Health
Law
Performing arts
Financial services
Brokerage services (including investment management and investing, trading, or dealing in securities, commodities, or partnership interests)

Engineering and architecture were specifically excluded from the SSTB definition as it relates to this new deduction.

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Barrygbg1Author

Level 2

Thanks Karen. Sorry for my convoluted statement but yes I did understand what you say to be the case. I went to the links and did a few more searches and still cannot figure out if I am above the 315k threshold or not depending on whether interest, dividends and/or capital gains are considered part of our adjusted gross income for purposes of remaining qualified for the QBI. Thanks!

KarenL

Employee Tax Expert

No worries. QBI is based on "net taxable income" from qualified businesses. Each business activity is calculated separately and it does not include "investment" types of gain/loss such as selling a second home. Hope that helps to clarify it!

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