I am an independent contractor who is self-employed and working online but working from an overseas location (Mexico). The work I do is for a exclusive US based tech company and I get paid my income into a US bank account. However, I am based abroad due to being with my family. Can I use the QBI deduction with the above parameters (as long as my income is below the maximum levels for QBI)? Thank you so much
Because your sole-proprietorship business is "home" in Mexico, I'm going to say no. The QBI Deduction requirements specifically state that the deduction is available to a "domestic business". See the attached screenshot.
The QBI deduction is so new, and your situation unique. I'd recommend consulting a tax professional regarding your question.
*Please mark as best answer if your question is resolved. Thank you.
As noted by @Kat this area in general is new, and adding in the complexity of your facts is really beyond the scope of this forum.
Having said that, in general, I would say the income does not qualify. In order to qualify, the income must be effectively connected income. The sourcing rules for this are covered in Code Sections 861-865. The general rule for personal services is based on where the services are performed. Based on your current facts, that appears to be Mexico. As a result, that would disqualify the income from qualifying for the Section 199A deduction.
I would also recommend that you consult with a foreign tax specialist depending on the $$ involved.
@sweetsrw , while agreeing with @Kat & @Rick19744 as far as the question asked, I wonder are you US citizen / Resident ( Green Card ) . If that is true then yes you have to file a US return and the question regarding QBI is valid. Even then the question about your tax home would be pertinent -- if your tax home is Mexico ( i.e. you satisfy having an abode in Mexico, and pass the Physical Presence Test ) then your income , even if paid in the USA may be taxed by Mexico and also be eligible for foreign earned income exclusion. Every thing depends on facts and circumstances in this case. So please tell us more of the situation , including if this is your first year abroad and if your "employer" is withholding any taxes for you .