Question

Why does QBI from a pass through partnership get reduced by my capital gains on personal sale of stock which has nothing to do with the partnership? Doesn't make sense?

Forum|Forum|2 years ago
April 6, 2024
1 reply
0 views

I see that form 8995 calculates it that way, i.e., taxable income is reduced by net capital gain and then the QBI 20% is applied. And, in my situation, taxable income is actually less than my partnership income. I can understand why QBI is limited to taxable income but I just don't understand the reasoning for further reducing my taxable income by the net capital gain thereby reducing the amount the 20% can be applied to? Maybe I'm missing something, maybe there is no logic to it?

TurboTax Online

T

ThomasM125

I'm not sure why net capital gains factor into your qualified business income (QBI) deduction , but that is a component of the calculation, as you can see on Form 8995:

It may be because capital gain income is already tax-favored because of the potential for lower tax rates than ordinary income, so to allow a QBI deduction in addition to a lower tax rate would be doubling up on tax benefits associated with capital gain income.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"