Hello,
I am a US citizen and I teach online classes in my US home office for a foreign institution as my side job. I get paid in their currency and I also need to pay foreign taxes. In my case, can I take QBI deduction for this self employment business since it is foreign source income? I called turbotax and the expert told me that I should be able to take the QBI deduction while claiming foreign tax credit. But I cannot find a definite answer myself from internet. Can someone help?
Thanks!
Ok ... paying foreign taxes or taking the foreign tax credit have nothing to do with the QBI deduction on the Sch C income. Look at the form 1040 line 13 and the QBI worksheets.
Thank you! I know I can take foreign tax credit and I have no doubt about it.
My quesiton is whether I can take QBI deduction since my income is foreign source. I have the impression that foreign source income is not generally qualified for QBI. However, the turbotax helpline expert told me that since I am a US citizen and I operate my business in my US home office (online-teaching), so I should still able to take QBI. Any advice?
If you are an employee of the foreign institution, you would not be able to take the QBI deduction.
If you are an independent contractor, then yes, you would be able to take the deduction. It does not matter where the paying institution is located as long as you are performing the work from inside the US.
As an independent contractor, you would qualify under the category of "any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners"
In order to claim the full deduction, your income would also need to be less that $170,050 unless you are married filing jointly then it would be less than $340,100
I am actually an S corp. Non-SSTB, with W2 wages over the limit (only for 1 year). I think because I am a non-SSTB I would qualify, but I know there are some limits to what I can actually get as the deduction because of the income. Again I am operating solely out of the USA, with customers paying from their international account. Someone told me that because of the way I am paid internationally that I would not qualify (foreign source).
If I do qualify would you know what section or code that falls under? I would like to read further.
Thanks!
According to this IRS ruling HERE the answer is no
From what you are telling me, the income that you are discussing relates to activity not effectively connected with the conduct of business within the US.