Question

Tanuja Singh is a CPA and operates her own accounting firm (Singh CPA, LLC). As a single member LLC, Tanuja reports her accounting firm operations as a sole proprietor. Tanuja has QBI from her accounting firm of $540,000, reports W-2 wages of $156,000, and the unadjusted basis of property used in the LLC is $425,000. Tanuja is married and will file a joint tax return with her spouse. Their taxable income before the QBI deduction is $475,000 and their modified taxable income is $448,000. What is Tanuja's QBI deduction for 2018.

a. $-0-.
b. $49,625.
c. $89,600.
d. $78,000.
e. None of these choices are correct.

Answer 1

The QBI deduction for Tanuja in 2018 is $78,000.

Step-by-step explanation:

The QBI deduction allows certain business owners to deduct up to 20% of their qualified business income. To calculate the QBI deduction, we need to determine Tanuja's QBI, which is $540,000 in this case. Next, we need to calculate the W-2 wage limitation, which is the greater of 50% of the W-2 wages or 25% of the W-2 wages plus 2.5% of the unadjusted basis of property. In this case, the W-2 wage limitation is $78,200. Finally, we need to calculate the QBI deduction, which is the lesser of 20% of the QBI or the taxable income minus the W-2 wage limitation. Since the taxable income before the QBI deduction is $475,000 and the W-2 wage limitation is $78,200, the QBI deduction for Tanuja is $78,000.