In 2019, Henry Jones (Social Security number 123-45-6789) works as a freelance driver, finding customers using various platforms like Uber and Grubhub. He is single and has no other sources of income. In 2019, Henry's qualified business income from driving is $61,200. Assume Henry takes the standard deduction of $12,200. Click here to access the 2019 individual tax rate schedule to use for this problem. Assume the QBI amount is net of the self-employment tax deduction.

Required:
a. Compute Henrys QBI deduction and his tax liability for 2019.
b. Complete Henry's 2019 Form 8995 (Qualified Business Income Deduction Simplified Computation).

Question

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Parrain Parrain · Answer 1 · 2021-05-08T03:29:00+02:00

Answer:

a. QBI Deduction = $9,800

Tax liability = $4,510

Explanation:

a. The BI deduction in 2019 was 20% of the qualified business income in excess of the standard deduction:

QBI deduction = (61,200 - 12,200) * 20%

= $9,800

We then use this to find the taxable income:

= Qualified business income - standard deduction - QBI deduction

= 61,200 - 12,200 - 9,800

= $39,200

Tax liability for a single person in 2019 as shown by the attached file is:

= 970 + 12% * (39,200 - 9,700)

= 970 + 3,540

= $4,510

b. Form not attached but the main item should be the taxable income which is calculated above.