Susan, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is not a "specified services" business. In 2019, the business pays $60,000 of W–2 wages and generates $200,000 of qualified business income. Susan also has a part-time job earning wages of $11,000 and receives $3,200 of interest income.
Assume the QBI amount is net of the self-employment tax deduction.
What is Susan's tentative QBI based on the W–2 Wages/Capital
Investment Limit?
$
Determine Susan's allowable QBI deduction.
$
Susan's taxable income before the QBI deduction is
Net Income | 200,000 |
Add:- Wages | 11,000 |
Add:- Interest Income | 3200 |
Less:- Standard Deduction for 2019 | 12200 |
202000 |
As Susan taxable income before the QBI deduction exceeds $ 157500, the W-2 wages/ Capital investment limit must be considered.
(1) 20% of qualified business income (200000 x 20%) = $40,000
(2) But no more than the greater of
* 50 % of W-2 wages (60000 x 50 % ) or $ 30,000
* 25 % of W-2 wages (60000 x 25 % ) plus $15,000
* 25 % of unadjusted basis of (+) 0 $ 15,000
qualified property ($ 0 x 2.5 %)
And no more than
(3) 20% of modified taxable income ($202000 x 20 %) $ 40400
So, initially, Susan QBI deduction is limited to $ 30,000. How ever, as susan's taxable income before the QBI deduction exceeds $ 157,500 but is less than $ 207500 and the W-2 wages / capital investment portion of the computation is the limiting factor, the general 20% QBI Amount, is used but reduced as follows.
Susan, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is...
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Susan, a single taxpayer, owns and operates a bakery as a sole proprietorship. The business is not a specified services business. In 2019, the business pays $60,000 of W–2 wages and reports qualified business income of $200,000. Susan also has a part-time job earning wages of $11,000 and receives $3,200 of interest income. Assume the QBI amount is net of the self-employment tax deduction. What is Susan's tentative QBI based on the W–2 Wages/Capital Investment Limit? $ Determine Susan's allowable...
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Problem 2-35 (LO. 3, 4) Susan, a single taxpayer, owns and operates a bakery (as a sole proprietorship). The business is not a "specified services" business. In 2020, the business pays $60,000 of W-2 wages, has $150,000 of qualified property, and generates $200,000 of qualified business income. Susan also has a part-time job earning wages of $11,100 and receives $3,300 of interest income. Her standard deduction is $12,400. Assume the QBI amount is net of the self-employment tax deduction. What...
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