Qualified Business Income for income on 1099-Misc

It depends. If she was an independent contractor, she will need to report the income on Schedule C and deduct any associated business expenses. 

For the purposes of the deduction, QBI is defined as net business income, excluding:

• Income generated outside the United States
• Investment income
• W-2 compensation paid to an S corporation owner
• Guaranteed payments to a partner
• Income from REITs, publicly traded partnerships, and qualified cooperatives (these entities may qualify for a 20% deduction under a different set of rules, the explanation of which is beyond the scope of this FAQ).

However, the QBI is limited for specified service trade or businesses (SSTB). The specified service trade or business (SSTB) classification doesn’t come into play as long as total taxable income is under $157,500 ($315,000 if filing jointly). At higher income levels, the deduction for SSTBs is reduced and in some cases, eliminated.

For the purposes of the QBI deduction, an SSTB is defined as any trade or business that performs services in the fields of:

• Accounting
• Actuarial science
• Athletics
• Consulting
• Health
• Law
• Performing arts
• Financial services
• Brokerage services (including investment management and investing, trading, or dealing in securities, commodities, or partnership interests)

Engineering and architecture were specifically excluded from the SSTB definition as it relates to this new deduction.

What is the Qualified Business Income (QBI) Deduction