Sally,a single taxpayer, owns and operates a hardware store as a sole proprietorship. In 2018, the hardware store has net income of $100,000. Sally also has dividend income of $2,000 from her investments. How much may Sally claim as her Qualified Business Income (QBI) deduction in 2018?

Question

Quizplus · Accepted Answer

Since Sally is a sole proprietor, she is eligible for the QBI deduction. The deduction amount will depend on several factors, including the net income of the business and Sally's taxable income. The QBI deduction is calculated as 20% of the net income from the business, up to a certain limit.

In this case, Sally's net income from the hardware store is $100,000. So, her QBI deduction would be 20% of $100,000, which is $20,000. However, the deduction is subject to certain limits, based on Sally's taxable income. Since Sally has only $2,000 in dividend income, her taxable income is likely to be relatively low. Based on the available information, it appears that Sally is eligible to deduct the full $20,000 as her QBI deduction in 2018.

Therefore, the answer is (C) $18,000.

Sally,a Single Taxpayer, Owns and Operates a Hardware Store as a Sole