Qualified Business Income Deduction

[SoCal-Guy-in-CA]

If SE income was deducted from my taxable income in 2021 (which I assume did not get the benefit of QBI - I use  TurboTax), because it was placed into a SE 401K, then withdrawn in 2022 (I'm now 65), do I get the QBI deduction in 2022 since all that income was SE (Sef-Employment) income?

[Vanessa A · Accepted solution]

No.  The QBI is deducted in the year you received the self-employment income.  When you moved it into a retirement plan, even though it was from self-employment, it became retirement income and is no longer self-employment income.  Since it is now retirement income and was not earned in 2022, you cannot take the QBI deduction for that income.  Also, you technically received a tax break in the year you made the contribution, so you cannot double dip and get a second tax break on the same income. 

[eharder83]

Clarifying question . . . The income I am asking about is the income to the business that was not retirement pension or wages. It is from when she retired and started freelance consulting/sub-contracting.

[AliciaP1]

Self-employment income is eligible for the QBI deduction if the income is considered Qualified Business Income.  See What is the Qualified Business Income (QBI) deduction? for more details.

@eharder83