Why is my QBI deduction reduced to 0 when I specified that my business is not an SSTB? It appears as it is not giving me the deduction due to the maximum income criteria.

[DanielV01]

If your income is over the threshold, there are other factors.  Please comment what is your structure, your income, and what codes you see in box 20 if a partnership (Form 1065) or in box 17 if an S-corp (Form 1120-S).

[jrfried]

I am a sole proprietorship (No forms other than 1099). Total income is 650K.  Thank you!

[jrfried]

I finally talked myself into reviewing the "Not for the faint of heart" discussion.  I think I understand what they are saying but in the "over 415k" section they only include the lower of W-2 wages or, 20% or QBI.  Since I don't pay myself W-2 wages, I am not eligible.  It is still my business and I am reporting income via a schedule C so I don't understand the intent of this section.  I know it is not your job to explain this but I am hoping you have some idea.  Thanks.

[DanielV01]

The only thing I can say is that this is how Congress drew up the statute.  This gives you an opportunity to use tax strategy.  As a self-employed individual, you do have the option of paying yourself a salary that withholds Social Security and Medicare tax.  This way, the self-employment amount above the salary you pay yourself is eligible for the QBI deduction.  And, you may wish to speak with a tax attorney or other qualified professional about whether or not you might be better served with a different entity selection, such as an S Corp.  From a tax standpoint, that entity might give you the greatest tax savings advantage, but in the end is a choice you must investigate and determine, and seeking a professional would be advisable if you look into this.

[DanielV01 · Accepted solution]

Your QBI might be phased-out.  Even though you are not an SSTB, QBI does phase out unless you have wages, or a combination of wages and depreciable property (referred to as UBIA:  Unadjusted Basis Immediately After Acquisition).  It sounds like your business did not pay wages.  If you also did not have significant depreciable property qualifying for UBIA, then no QBI will calculate.

It is a complex formula, but this FAQ can help you to understand it a bit more (click on the View the entire answer, and then the embedded link  How is the deduction calculated? (Not for the faint of heart!): 

 https://ttlc.intuit.com/replies/7019998