Question

Tammy, a single taxpayer, has a part-time job at BigCo, a company in which she has no ownership interest. In addition, she owns and operates LittleCo, a sole proprietorship that is a qualified trade or business. Tammy is paid wages of $40,000 by BigCo and has $100,000 in qualified business income from LittleCo. She has no other items of income or loss and $25,000 of itemized deductions. Assume the QBI amount is net of the self-employment tax deduction. What is her qualified business income deduction for 2020

Answer 1

the deduction of the qualified business income is $20,000

Step-by-step explanation:

The computation of the qualified business income is shown below:

= Qualified business income × deduction percentage

= $100,000 × 20%

= $20,000

The deduction percentage should be allowed 20% of the qualified business income and the same is to be applied

Hence, the deduction of the qualified business income is $20,000