Question

Thad a single tax payer has taxable income before the QBI deduction of $187,500. Thad a CPA operates an accounting practice as a single member LLC(which he reports as a sole proprietorship). During 2018, his proprietorship reports net income of $150,000, W–2 wages of $125,000, and $10,000 of qualified property.

What is Thad's qualified business income deduction?

Answer 1

Answer: $30,000.

Explanation: Thad's has a "specified services" business. As his taxable income before the QBI

deduction is more than $187,500 (but less than $207,500), he will receive a partial QBI deduction. Given the W-2 wages he reports, his QBI deduction will not be limited by the W-2 wages/capital investment limitation (50% of his W-2 wages is $62,500; this amount will exceed the other QBI deduction computations).