guidelines for extracredit HW3 Posted on: Tuesday, April 9,2019 9:47:38 AM EDT Deduction for Qualified Business Income In general, the deduction for QBI is the lesser of 20% of; 1) Qualified business income or 2) Modified taxable income (taxable income before the QBI deduction, reduced by any net capital gain) QBI the ordinary income less ordinary deductions a taxpayer earns from a "qualified trade or business Limitations a) if taxable income before QBI deduction is greater than $315k (MFl) or $157,500 (all others), the QBI Deduction cannot exceed the greater of: 1) 50% of the W-2 wages relating to the qualified trade or business or 2) the sum of (i) 25% of the w2 wages relating to the qualified trade or business , and (ii) 2.5% of unadjusted basis (immediately after acquisition) of all qualified property This limit is phased out over $100k (MF) or $50k (all others) of taxable income. Once MFj has taxable income of $415k ($207,500 all others), the W2 wages and capital investment limitation will be completely in play. Problem 1. Marie, married taxpayer, operates a business as a sole proprietor. The business has no employees and no significant assets. During 2018, the net income of Marie's business reported on Schedule C (form 1040) amounts to $250k and her modified taxable income is $270k. What is Marie's QBI Deduction? 2. Now, assumed the about but the business has one employee, who is paid $80k during 2018, and net income from Marie's proprietorship amounts to $500k and her taxable income before the QBI deduction is $600k. What are her limitations if any? What is Marie's QBI Deduction? 3. Assumed now problem #2 except that Marie's taxable income before the QBI deduction is $350K What is her limitations? What is her QBI Deduction