QBI deduction calculations

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  • #2099
    yertchuk
    Participant

    I realize this may really be a question for TurboTax, but in case someone else is having this problem:

    I’m running a small Schedule C sole proprietorship, and TurboTax is calculating the QBI deduction.

    QBI amount shown on line 1 of the TT QBI deduction simple worksheet is different from net profit shown on line 31 of schedule C. For the life of me a can’t see why this would be. I do understand how the final deduction amount is calculated, but the problem seems to be that the starting value of total QBI doesn’t match the Schedule C amount.

    Thanks for any insight.

    #2107
    Kaye Thomas
    Moderator

    Certain items that don’t appear on Schedule C are required to be taken into account in determining your QBI. Here’s a quote from the regs:

    For purposes of section 199A only, deductions such as the deductible portion of the tax on self-employment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis to the gross income received from the trade or business.

    #2109
    yertchuk
    Participant

    Thanks, Kaye. As it happened, after I posted here, it was pointed out to me that if you scroll all the way to the bottom of the TurboTax Schedule C, then self-employed health insurance, etc., is taken off the net profit. This explains the discrepancy that I was asking about.

    The wording in that quote could have been written more clearly, though!

    • This reply was modified 2 years, 8 months ago by yertchuk.
    #2119
    kaneohe
    Participant

    Is there an IRS form, worksheet,or instruction that explicitly details the steps from Sch C net income to QBI?

    • This reply was modified 2 years, 8 months ago by kaneohe.
    #2150
    kaneohe
    Participant

    sure is not obvious how to quote or delete………….

    I believe the worksheet in the line 9 instructions for the 1040 lead you through the calculations: pg 37
    https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

    be careful beginning w/ line 11 of wksht:
    11. Income before qualified business income deduction .

    The lines before this refer to QBI. However line 11 just has I (=income) and they mean following the 1040 from AGI, and then subtracting the std or itemized deduction to get the
    I (income) to be used here for an alternate calculation. The lower of the marketed 20% deduction and this alternate calculation is the real QBI deduction and it appears often it is not what most expect.

    • This reply was modified 2 years, 8 months ago by Kaye Thomas.
    #2203
    kaneohe
    Participant

    “For purposes of section 199A only, deductions such as the deductible portion of the tax on self-employment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis to the gross income received from the trade or business.

    Having trouble understanding the last (bolded) part means……….isn’t the the individual’s gross income from the trade or business 100% of the gross income received from the trade of business………the proportionate is the confusing term.

    If a person has SE income and Medicare, can the cost for Medicare be considered as SE health insurance? and any Medigap policies?

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