Why does the software report my Qualified Business Income Deduction on Form 8995 as $279 when 20% of my $1500 of NEC is $300?

Forum|Forum|3 years ago
February 23, 2023
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I have reported $1500 of Non Employee Compensation on Schedule 2 and Schedule SE. the software calculates a Qualified Business Income Deduction of $279 on From 8995, yet 20% of my $1500 of NEC is $300. Why the difference?

TurboTax Deluxe Online

Best answer by HelenC12

With the QBI deduction, most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax (but not self-employment tax) whether they itemize or not.

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. The calculations also get quite complicated, but TurboTax easily handles them and will figure out how much of a deduction you’re entitled to.

Please print out your QBI worksheet so you can see how you QBI deduction was calculated.

Also, please refer to the TurboTax FAQ What is the Qualified Business Income (QBI) deduction? and scroll down to How is the deduction calculated?

HelenC12Answer

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. The calculations also get quite complicated, but TurboTax easily handles them and will figure out how much of a deduction you’re entitled to.

Please print out your QBI worksheet so you can see how you QBI deduction was calculated.

Also, please refer to the TurboTax FAQ What is the Qualified Business Income (QBI) deduction? and scroll down to How is the deduction calculated?

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