Rachel operates a sole proprietorship that earns $200,000 of qualified business income after deducting salaries of $60,000.The sole proprietorship is not a specified service business.She files a single tax return for 2019.Assume her taxable income before the QBI deduction is $230,000.Rachel's QBI deduction for 2019 is:
A)$-0-.
B)$30,000.
C)$35,000.
D)$46,000.
E)$52,000.

Question

Quizplus · Accepted Answer

The QBI deduction is 20% of the qualified business income. Rachel's QBI is $200,000, so 20% of that is $40,000. However, the deduction is limited to 20% of her taxable income before the QBI deduction, which is $230,000. 20% of $230,000 is $46,000. Since $40,000 is less than $46,000, Rachel's QBI deduction is $40,000.

Rachel Operates a Sole Proprietorship That Earns $200,000 of Qualified