Deductions & credits

QBI is calculated by taking your Gross income - expenses - 1/2 deduction for your Self-employment earnings-any retirement or Health insurance deducted by the business. Whatever remains is multiplied by .2 to get the amount of your QBI.

If you had a net loss in the business, you would not receive any QBI. Check box 13 of the 1040 to see if QBI is listed there. If not, go back and review your entries in Schedule C and supply any information that is required. 

The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $170,050 ($340,100 if filing jointly), the type of business also comes into play.

At incomes below that level, the deduction is 20% of either taxable income (minus capital gains and dividends) or the QBI, whichever is less.

At higher income levels, the deduction is reduced or eliminated, depending on the nature of the business. The calculations also get quite complicated, but TurboTax easily handles them and will figure out how much of a deduction you’re entitled to.

For the purposes of the deduction, QBI is defined as net business income, excluding:

• Income generated outside the United States
• Investment income
• W-2 compensation paid to an S corporation owner
• Guaranteed payments to a partner
• Income from REITs, publicly traded partnerships, and qualified cooperatives (these entities may qualify for a 20% deduction under a different set of rules, the explanation of which is beyond the scope of this FAQ).

This deduction applies to Schedule C filers (sole proprietorships and other self-employed businesses), LLCs, partnerships, S corporations, estates, and trusts. Certain rental enterprises may also qualify. Corporations are not eligible because they received their own tax breaks under the TCJA.

That said, not every eligible business automatically qualifies for the deduction. In particular, some types of service businesses (SSTBs) are disqualified once the taxable income on the return exceeds $220,050 ($440,100 if filing jointly).

Make sure also to check the Box on your W2 indicating you are a statutory employee. Once you check the box and finish the W2, there will be some follow questions for you to complete. Once these are complete, 

1. Go to Federal > Income & Expenses>
2. Self employment>self-employment
3. You will see your profile started.  Your income is already reported in the program as W2 income so you will need to finish out this section to claim your QBI.
4. After expenses are entered and you have a net profit after entering your expenses, the amount of the net profit  is  multiplied by .2 to determine your QBI.