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How to calculate qualified business income deduction?

Date of Posting : June 22, 2020

The SSTB limitation mentioned in the question-above is not applicable when the income is less than $315,000 for a couple filing taxes jointly, or $157,500 for all other taxpayers; this deduction is lesser than:

20 percent of the taxpayer’s Qualified Business Income, and 20 percent of the taxpayer’s qualified real estate investment trust (REIT) dividends and eligible publicly traded partnership (PTP) income

20 percent of the taxpayer’s taxable income less net capital gains.

If the taxable income of the taxpayer is more than $315,000 or $157,500, the deduction will be limited depending on the type of business for an SSTB, the W-2 wages paid by the company, and the UBIA basis of some properties used by the industry. These limitations are applicable for taxable income between $315,000 and $415,000 in case of joint filing, and all other taxpayers with taxable income between $157,500 and $207,500. The threshold amounts and phase-in range are for tax-year 2018 and will be increased or decreased as per inflation in the coming years.