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Why is my QBI deduction limited?

Forum|Forum|3 years ago
March 11, 2023
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Why is my QBI deduction limited to "20% of taxable income net of capital gain" if there is no capital gain?

Why not the "20% of QBI from this business", since there is no capital gain?

Is this a bug in TurboTax logic? Or is there something I don't understand? If so, please explain.

Thank you.

Best answer by DawnC

The QBI deduction is 20% of the lesser of:

taxable income - capital gains/dividends OR
qualified business income

The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $170,050 ($340,100 if filing jointly), the type of business also comes into play.

At incomes below that level, the deduction is 20% of either taxable income (minus capital gains and dividends) or the QBI, whichever is less.

At higher income levels, the deduction is reduced or eliminated, depending on the nature of the business.

To see how the deduction was calculated, view Form 8995. Line 15 will show your deduction. It is the lesser amount from Line 10 (20% of QBI) and Line 14 (20% of taxable income). In the example below, the deduction is 1,047 (based on QBI) or 370 (based on taxable income), so I get the lower amount, $370 as a QBI deduction.

DawnCAnswer

The QBI deduction is 20% of the lesser of:

taxable income - capital gains/dividends OR
qualified business income

The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $170,050 ($340,100 if filing jointly), the type of business also comes into play.

At incomes below that level, the deduction is 20% of either taxable income (minus capital gains and dividends) or the QBI, whichever is less.

At higher income levels, the deduction is reduced or eliminated, depending on the nature of the business.

To see how the deduction was calculated, view Form 8995. Line 15 will show your deduction. It is the lesser amount from Line 10 (20% of QBI) and Line 14 (20% of taxable income). In the example below, the deduction is 1,047 (based on QBI) or 370 (based on taxable income), so I get the lower amount, $370 as a QBI deduction.

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