Gary has qualified business income of $40,000 in 2019. His taxable income without net capital gains is $28,000. Gary's QBI deduction for 2019 is?

Question

Quizplus · Accepted Answer

The QBI deduction is generally 20% of qualified business income. Gary's QBI is $40,000, so 20% of $40,000 is $8,000. However, the deduction cannot exceed 20% of his taxable income excluding net capital gains. Since his taxable income without net capital gains is $28,000, 20% of that is $5,600. Therefore, his QBI deduction is limited to $5,600.

Gary Has Qualified Business Income of $40,000 in 2019