Question

Qualified Business Income Deduction much lower than last year with same jobs

Forum|Forum|2 years ago
February 14, 2024
1 reply
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My Qualified Business Income Deduction is showing as much lower compared to last year, and I don't know why. I have the same two jobs, same fields. Both as an independent contractor. The only difference is how much I made this year compared to last year.

Last year, my total QBI deduction was $1,238, but I didn't need it because I made less than the standard deduction. This year, I made a little more than the standard deduction ($17,550 net income in total), and my QBI deduction is only $398. I was really counting on that deduction being higher, since I knew I would be making more this year.

Am I doing something wrong? Or is making that couple thousand above the standard deduction amount really doing that much damage?

Here are more figures, if it helps:

Job 1 net income: $16,470.00

Job 2 net income: $1,083.00

SE tax: $1,240

Last year, my net income was only $7,789 (had just started one of those two jobs)

TurboTax Self Employed Online

D

DianeW777

The Qualified Business Income Deduction (QBID) is calculated in two ways, and the actual amount will be the lesser of the two.

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

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 $182,100 ($364,200 if filing jointly), the type of business also comes into play.

Check your taxable income on your Form 1040, Line 15, then add back the QBID, subtract any capital gains and/or dividends. Multiply the total by 20% to see if that is where the $398 is coming from. Also you can print your return and review Form 8995.