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Qualified Business Income Deduction

Forum|Forum|3 years ago
April 5, 2023
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If SE income was deducted from my taxable income in 2021 (which I assume did not get the benefit of QBI - I use TurboTax), because it was placed into a SE 401K, then withdrawn in 2022 (I'm now 65), do I get the QBI deduction in 2022 since all that income was SE (Sef-Employment) income?

TurboTax Self Employed Online

Best answer by Vanessa A

No. The QBI is deducted in the year you received the self-employment income. When you moved it into a retirement plan, even though it was from self-employment, it became retirement income and is no longer self-employment income. Since it is now retirement income and was not earned in 2022, you cannot take the QBI deduction for that income. Also, you technically received a tax break in the year you made the contribution, so you cannot double dip and get a second tax break on the same income.

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Vanessa AAnswer

No. The QBI is deducted in the year you received the self-employment income. When you moved it into a retirement plan, even though it was from self-employment, it became retirement income and is no longer self-employment income. Since it is now retirement income and was not earned in 2022, you cannot take the QBI deduction for that income. Also, you technically received a tax break in the year you made the contribution, so you cannot double dip and get a second tax break on the same income.

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eharder83

Clarifying question . . . The income I am asking about is the income to the business that was not retirement pension or wages. It is from when she retired and started freelance consulting/sub-contracting.

AliciaP1

Self-employment income is eligible for the QBI deduction if the income is considered Qualified Business Income. See What is the Qualified Business Income (QBI) deduction? for more details.

@eharder83

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