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Jessica is single and has taxable income of $305,000 of which $130,000 is attributable to her...

Jessica is single and has taxable income of $305,000 of which $130,000 is attributable to her consulting sole proprietorship. She paid W-2 wages to her employees of $75,000. What is Jessica’s qualified business income deduction?

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Answer #1

SOLUTION :

Jessica's Qualified Business Income Deduction - $ 26000

NOTE :

Calculation of QBI as per Sec 199A of IRS

Income for 199A Deduction is 20% of QBI or 20% of Defined Taxable Income whichever Is lower. Here it is 20% of $ 130000.

Calculation of 199 A Deduction

Amount in $
(a) 20% of QBI 26000.00
(b) 50% of Wages 37500.00
(c) 25% of Wages + 2.5% of Assets 18750.00
(d) Greater of (b) and (c) 37500.00
(e) Lesser of (d) and (a) qualifies for deduction 26000.00
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