Qualified Business Income Deduction

[Scott3415]

I understand that the self-employment QBI deduction is only available for those under a certain income threshold, however, why would the deduction be applied at a different rate if I specify the owner of the business as myself, vs my spouse, vs partnership. All 3 yield a different outcome. We are married filling jointly, so why does the owner have any barring?

[ThomasM125 · Accepted solution]

For the Qualified Business Income deductions (QBI) you may need to factor in things outside of business income, such as the self-employment tax deduction, IRA contributions, self-employed health insurance deduction and QBI loss carryover from the previous year, as all of these are deducted from your business income to determine your QBI.

All of these are specific to each taxpayer on a joint return. So, when you change ownership of the business you can also change the affect these things have on the QBI deduction.

For instance, if you were over the income limit for social security tax and you added self-employment income for yourself, your self-employment tax deduction may be different then it was for your spouse, and that would affect your QBI, as you must deduct the self-employment tax deduction from business income to determine the QBI.

[Scott3415]

Thomas,

Thank you very much for taking the time to respond. Your reply was very helpful and as it turns out, your example hit the nail on the head. I didn’t account for the max SS limit.

Thanks again!