Susan's taxable income before the QBI deduction is
Net income = $ 200,000
(+) wages = $11,000
(+)Interest income = $ 3,000
(-)Standard deduction = $(12,000)
Taxable income = $202,000
As susan's taxable income before the QBI deduction exceeds $ 157,500 , the W-2 wages/ capital investment limit must be considered
(1) 20% of qualified business income $ 40,000
($200,000 x 20%)
(2) But no more than the greater of 50% of W-2 wages($60,000 x 50%) $30,000
25% of W-2 wages($60,000 x 25%) plus 15,000
2.5% of unadjusted basis o qualified property (0 x 2.5%) 0 $15,000
And no more than
(3) 20% of modified taxable income($202,000 x 20%) $40400
So, initially , susan's QBI deduction is limited to $30,000 . However as susan's taxable income before the QBI deduction exceeds $157,500 , but is less than $207,500 and the W-w wages/ capital investment portion of the computation is the limiting factor , the general 20% QBI amount is used but reduced as follows
(1) Determine difference between general 20% QBI deduction amount and the W-2 wages / capital amount
General 20% QBI deduction amount 40,000
less: The W-2 wages/ capital amount (30,000)
Excess $10,000
(2) Determine reduction ratio:
Reduction ration = $44500(202000 - 157500) / $50,000
= 89%
(3)Determine the reduction in the W-w wages/capital limit
Excess($10,000 x 89%) = $8900
(4)Determine find QBI amount
General 20% QBI amount $40,000
less: reduction in the W-2 wages/ capital limit (8900)
Find QBI amount $31100
