Tax Law and News New and Improved: Intuit’s QBI Entity Selection Calculator Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mike D'Avolio, CPA, JD Modified May 6, 2019 2 min read A centerpiece provision of the Tax Cuts and Jobs Act is the new Sec. 199A measure that affords owners of sole proprietorships, partnerships, S corporations and trusts a 20 percent deduction on their qualified business income (QBI) beginning in tax year 2018. In general, the deduction is available to qualifying business owners with taxable income below $315,000 for joint filers and below $157,500 for other filers, with potentially limited benefit above those levels. Small businesses qualifying for the 20 percent tax deduction could see their effective marginal tax rate reduced to 29.6 percent. Another significant change under the Tax Cuts and Jobs Act is the reduction of tax rates for C corporations to a flat 21 percent. Also, remember that C corporations are taxed twice – once on the corporate income and then on the returns to investors. These new tax law changes present tax professionals and small business owners with some in-depth tax planning opportunities to determine the best entity type, optimize qualified business income, and potentially realize substantial tax savings. Intuit® ProConnect™ has developed the QBI Entity Selection Calculator to provide in-depth computations of the qualified business income deduction according to IRS worksheets for tax planning purposes, and allow tax professionals to evaluate and optimize the best type of legal entity for small business owners to consider based on tax benefits. Notable Features Incorporates two worksheets from Chapter 12 of IRS Publication 535 Schedule A – Specified Service Trade or Business (SSTB) (phase-out computation) Worksheet 12A – Qualified Business Income Deduction Worksheet W-2 wages & unadjusted basis of qualified property limit Phased-in reduction 20% of taxable income limit Allows users to evaluate optimal entity type, including including Schedule C/E, partnership, S corporation and C corporation, based on amounts entered Includes designation for filing status Additional Planning Opportunities Depending on the QBI and taxable income levels, it might make sense to purchase a capital asset or contribute to a retirement plan in the current year or hold off until next year to help maximize the QBI deduction. Since W-2 wages reduce qualified business income but increase the wage / UBIA limitation, there is a planning opportunity to optimize wages paid and thus maximize the QBI deduction. Because of the phase-outs and threshold amounts, married taxpayers may want to compare married filing jointly versus married filing separately to see which status yields the higher benefit. For additional resources, visit IRS Deduction for Qualified Business Income FAQs. Editor’s note: This article was originally published on Oct. 29, 2018, and was re-published with information about calculator updates on Jan. 18, 2019. Previous Post IRS Waives Underpayment and Underwithholding Penalty for Certain Taxpayers Next Post IRS Issues Final Sec. 199A Regulations Written by Mike D'Avolio, CPA, JD Mike D’Avolio, CPA, JD, is a tax law specialist for Intuit® ProConnect™ Group, where he has worked since 1987. He monitors legislative and regulatory activity, serves as a government liaison, circulates information to employees and customers, analyzes and tests software, trains employees and customers, and serves as a public relations representative. More from Mike D'Avolio, CPA, JD 3 responses to “New and Improved: Intuit’s QBI Entity Selection Calculator” Great information to know! Thank you for the continuous updates. Very helpful. Thank you again. Judith Where do I find this feature in ProSeries? Hi Susan, you can find the Choice of Entity Calculator here: http://intuitptg.com/QBI/Entity2018QBI/Entity2018QBI.htm — thanks! Browse Related Articles Tax Law and News IRS Issues Final Sec. 199A Regulations Tax Law and News Professional services: QBI deduction (SSTB) Tax Law and News Guidance Issued on Deductions for Cooperatives and Thei… Tax Law and News The Treasury and IRS Issue Additional Guidance on Quali… Advisory Services Tax planning strategies: how to maximize the qualified … Tax Law and News How Do You Optimize Wages to Maximize the 20% QBI Deduc… Tax Law and News A Key Provision of the Tax Reform Act: New 20% Deductio… Tax Law and News Tax Reform 101 for Millennials Tax Law and News Advice for Business Clients Closing Out Tax Year 2019 Tax Law and News 5 Ways to Get a Head Start on Tax Reform Planning
Great information to know! Thank you for the continuous updates. Very helpful. Thank you again. Judith
Hi Susan, you can find the Choice of Entity Calculator here: http://intuitptg.com/QBI/Entity2018QBI/Entity2018QBI.htm — thanks!