Final answer:
Meghann's Qualified Business Income deduction for 2023 is limited to 20% of her modified taxable income, which amounts to $19,684.
Step-by-step explanation:
The Qualified Business Income (QBI) deduction is a tax benefit designed to assist taxpayers with qualified business income from pass-through entities. In the tax year 2023, Meghann, a single taxpayer, reported a QBI of $140,600 and a modified taxable income of $98,420 before applying the QBI deduction.
To calculate Meghann's QBI deduction, she multiplies her QBI by the applicable percentage, which is 20%. The computation is as follows: $140,600 x 20% = $28,120. While this calculated QBI deduction is $28,120, tax regulations stipulate that this figure should not exceed 20% of her modified taxable income. In this case, 20% of Meghann's modified taxable income is $19,684.
Given that $28,120 exceeds the limit of $19,684, Meghann's QBI deduction is constrained by the latter amount. Consequently, her QBI deduction for the tax year 2023 is determined to be $19,684. This limitation ensures that the QBI deduction remains proportionate to the taxpayer's modified taxable income, preventing an excessive deduction that could skew the intended balance of the tax benefit. The calculation highlights the careful considerations and limitations set by tax regulations to ensure fairness and accuracy in the application of the QBI deduction for eligible taxpayers.