Question

Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports QB) of $ 900,000 and is not a specified services business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $ 30,000. Ellie's taxable income before the QBI deduction is $ 740,000 (this is also her modified taxable income). What is Ellie's QBI deduction for 2019?

Answer 1

$148,000

Step-by-step explanation:

Ellie's taxable income before the QBI deduction is greater than the $207,500 threshold, the W–2 Wages/Capital Investment Limit has to be considered.

20% of QBI = $900,000 x 20%

= $180,000

But no more than the greater of:

50% of W-2 wages

= $300,000 x 50%

= $150,000

25% of W-2 wages + 2.5% of the unadjusted basis of qualified property

= ($300,000 * 25%) + ($30,000 * 2.5%)

= $75,750

$75,750

Is not more than:

20% of modified taxable income

= $740000 x 20%

= $148,000

Ellie's QBI deduction for 2019 is $148,000.