Level 2

QBI Deduction

Forum|Forum|7 years ago
February 13, 2019
2 replies
0 views

Does anyone else find it ironic that this was announced as a pass-thru entity deduction but somehow the Schedule C (really not a pass through-but part of) get the best deduction. If an S-Corp makes $100,000 and the person takes a $60,000 payroll and has $40,000 worth of K-1 income they only get 20% of the $40,000. But a Schedule C person gets 20% of $100,000.00. The only thing the W-2 income does is help limit the amount you can take for QBI deduction. What am I missing?

This topic has been closed for replies.

IntuitJim

Level 5

Agreed. The QBI deduction can be very different based on entity type and income levels. Schedule C's may lose the deduction completely at high income levels if the activity has no wages; at lower levels, it might get a higher deduction than S Corps. It does create planning opportunities.

Based on customer feedback, we created a QBI Entity Selection calculator to help Pros evaluate the QBI deduction, and total tax, across entities. You can find the "QBI Entity Selection Calculator" in the Tax Reform Resource Center.

https://proconnect.intuit.com/tax-reform/

itonewbie

Level 15

Entity choice and income levels do produce different results even though the economics are exactly the same. You may be interested in this article that discusses these in details: https://www.forbes.com/sites/anthonynitti/2018/01/04/the-new-qualified-business-income-deduction-varies-based-on-your-business-type-or-does-it/#50d886692076

---------------------------------------------------------------------------------Still an AllStar

IntuitJim

Level 5

ItoNewbie, thanks for sharing external content. I'm a big fan of Tony Nitti, CPA's articles in Forbes, but the Jan, 2018 article you referenced was updated with more accurate information after the IRS issued regs in Aug. Check this article for more accurate analysis and thank you for the helpful post!

https://www.forbes.com/sites/anthonynitti/2018/08/09/irs-provides-guidance-on-20-pass-through-deduction-but-questions-remain/#65f9bfa2ff84

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