How is the deduction for qualified business income computed?
A6. The SSTB limitation discussed in Q&A 5 does not apply if a taxpayer’s taxable income is below $315,000 for a married couple filing a joint return and $157,500 for all other taxpayers; the deduction is the lesser of:
A) 20 percent of the taxpayer’s QBI, plus 20 percent of the taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income
B) 20 percent of the taxpayer’s taxable income minus net capital gains.
If the taxpayer’s taxable income is above the $315,000/$157,500 thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business and the unadjusted basis of certain property used by the business. These limitations are phased in for joint filers with taxable income between $315,000 and $415,000, and all other taxpayers with taxable income between $157,500 and $207,500. The threshold amounts and phase-in range are for tax-year 2018 and will be adjusted for inflation in subsequent years.
How is the deduction for qualified business income computed?
A6. The SSTB limitation discussed in Q&A 5 does not apply if a taxpayer’s taxable income is below $315,000 for a married couple filing a joint return and $157,500 for all other taxpayers; the deduction is the lesser of:
A) 20 percent of the taxpayer’s QBI, plus 20 percent of the taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income
B) 20 percent of the taxpayer’s taxable income minus net capital gains.
If the taxpayer’s taxable income is above the $315,000/$157,500 thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business and the unadjusted basis of certain property used by the business. These limitations are phased in for joint filers with taxable income between $315,000 and $415,000, and all other taxpayers with taxable income between $157,500 and $207,500. The threshold amounts and phase-in range are for tax-year 2018 and will be adjusted for inflation in subsequent years.
The number turbotax inserted is not correct then--how do I fix it?
What program are you using? What information have you entered to generate the deduction? How is it off?
Self-employment program. The net business income is $47,628, but turbotax entered a deduction of $7,635. We are not above the threshold to take the full 20%, so it should be $9,526.
You have to consider the SE deduction on the 1040. Half of your SE tax.
Factoring that in still does not yield the number Turbotax used--it is flat out wrong and I need to know how to correct it.
We can do this, if you want. You can send me a sanitized copy of your return and I can look it over later.
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Thank you so much for bearing with me. I finally found someone in support last night who walked me through it. It turns out that you adjust the number not just for the SE tax deduction, but for the health insurance premium deduction as well, so the number is correct and I was wrong. I have used turbotax for many years and never knew the calculation forms were available in the print center, of all places.