Qualified Business Income Deduction Example 2

Qualified Business Income Deduction Example 2

FACTS: Andy and Emma are married with two dependent children. Andy earns net commission income of $45,000, and Emma earns a salary of $45,000. They have itemized deductions of $18,000, comprised of mortgage interest, state and local taxes, and charitable contributions.

Old Law

  • Net Commission Income
  • 45,000
  • Salaries & Wages
  • 45,000
  • Personal Exemption
  • (16,600)
  • Itemized Deductions
  • (18,000)
  • Taxable Income
  • 55,400
  • x Marginal Rate
  • 15%
  • Tax Liability
  • 7,358
  • Child Tax Credit
  • (2,000)
  • Net Tax Liability
  • 5,358

New Law

  • Net Commission Income
  • 45,000
  • Salaries & Wages
  • 45,000
  • Business Income Deduction
  • (9,000)
  • Standard Deductions
  • (24,000)
  • Taxable Income
  • 57,000
  • x Marginal Rate
  • 12%
  • Tax Liability
  • 6,459
  • Child Tax Credit
  • (4,000)
  • Net Tax Liability
  • 2,459

***Disclaimer: I am a tax accountant and a CPA licensed in Massachusetts , but I am not your accountant or advocate (Unless you have signed up to my services). This communication is not intended as tax advice, and no tax accountant -client relationship results**

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