Assumptions :

The taxpayer has no wages paid or investment in depreciable assets (i.e., the floor does not apply so the QBI is zero)

The taxpayer claimed the standard deduction.

Notes:

The phase-out of the QBI deduction varies due to filing status.

Pence Company operates a commerical business using the cash method of accounting and the calendar year. Business income minus business expenses other than owners' salaries and benefits is $500,000 Owner compensation is estimated to be $150,000. These items can be varied in the spreadsheet: Assume that the net income minus the entity tax is distributed to the owners. Net business income Owner's compensation Owner's benefits Individual tax rate (flat tax) $ 500,000 $ 150,000 $ 40,000 22% Entity Comarison Sole s Regular Proprietor Corporation Corporation Net income before tax, owners' salary and benefits Owner compensation Owner benefits--Medical insruance and retirement contributions Entity tax $ 500,000 S 500,000 $ 500,000 $ 150,000 $ 150,000 $ 150,000 $ 40,000 $ 40,000 $40,000 QBI deduction (if applicable) Taxable income to owners: Tax to owners--flow through (if applicable) Tax to owners-- dividend at 20% (if applicable) FICA tax on salary (if applicable) Self-employment tax (if applicable) Cash remaining