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Author Topic: Qualified Business Income (QBI) Deduction for Stock?  (Read 762 times)

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« on: January 29, 2021, 01:26 »
0
2020 was my first year earning a significant amount from selling stock. I have only ever had W2 income before then, so self-employment income is basically brand new to me. Do you guys fill out form 8995 (Qualified Business Income Deduction - Simplified Calculation) as a sole proprietor? Does stock income count as "Qualified Business Income?" If so, how do you calculate the qualified business income or (loss) (line c)?

My understanding that it would be calculated as the Net profit or loss from Schedule C minus the sum of lines 14 through 16 on Schedule 1 (deductible part of SE tax, any self-employed pretax retirement account contributions, and self-employed health insurance deductions, respectively). Does that sound right to you?

Also, as a sole proprietor, would the business name (line a) just be my name?


angelawaye

  • Eat, Sleep, Keyword. Repeat

« Reply #1 on: January 29, 2021, 07:20 »
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Do you file a Schedule C? My software automatically did it for me and I did qualify.

This deduction is amazing and I'm really hoping Biden does not reverse it.

Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #2 on: January 29, 2021, 10:16 »
0
Do you file a Schedule C? My software automatically did it for me and I did qualify.

This deduction is amazing and I'm really hoping Biden does not reverse it.

LOL has nothing to do with Biden or any of the recent political BS.

I've been filing out schedule C since about 1970, standard part of reporting income/expenses, profit or loss from a business. When we don't get a W-2 because we are paid commissions or in reality self employed - freelance artists, the schedule C is required.

https://www.irs.gov/instructions/i1040sc

Yes you can use it to record profits, which you have to do by law, as people who pay us file 1099s which go to the IRS. But also you can use expenses to your benefit. Keep Good Records and documentation! You can charge of expenses like mileage, equipment can be depreciated, and there are other costs of doing business that are allowable deductions.

History Note:  1862 - President Lincoln signed into law a revenue-raising measure to help pay for Civil War expenses. The measure created a Commissioner of Internal Revenue and the nation's first income tax.

« Reply #3 on: January 29, 2021, 17:03 »
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LOL has nothing to do with Biden or any of the recent political BS.

Actually, pass-through owners who qualify can deduct up to 20% of their net business income from their income taxes.  It was a nice break that happened under the orange clown in 2018.  https://www.nolo.com/legal-encyclopedia/the-new-pass-through-tax-deduction.html

To the OP, I just enter the numbers that Turbo Tax wants, and it magically happens.

angelawaye

  • Eat, Sleep, Keyword. Repeat

« Reply #4 on: January 29, 2021, 20:50 »
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The QBI (Qualified Business Income Deduction) was apart of Trump's Tax breaks for small businesses. It wasn't available years ago so that is why I was worried the new admin might get rid of it. I didn't mean to get political so I'm sorry if I upset you. Hopefully you took advantage of it.
« Last Edit: January 29, 2021, 21:10 by angelawaye »

angelawaye

  • Eat, Sleep, Keyword. Repeat

« Reply #5 on: January 29, 2021, 20:52 »
0
https://www.irs.gov/newsroom/qualified-business-income-deduction

This might help clarify what it is. Hope it helps :)

Uncle Pete

  • Great Place by a Great Lake - My Home Port
« Reply #6 on: January 30, 2021, 10:41 »
0
The QBI (Qualified Business Income Deduction) was apart of Trump's Tax breaks for small businesses. It wasn't available years ago so that is why I was worried the new admin might get rid of it. I didn't mean to get political so I'm sorry if I upset you. Hopefully you took advantage of it.

Not angry and I'm sick of negative politics and accusations, not you;D

This deduction began in 2018 and is scheduled to last through 2025that is, it will end on January 1, 2026 unless extended by Congress.

I still don't understand, as I pay someone who is up to date on the laws and trained and she's wonderful. I didn't know about this. I had to go read some more.

For tax purposes, what distinguishes these types of businesses is that they pay no taxes themselves. Instead, the profits (or losses) from such businesses are passed through the business and the owners pay tax on the money on their individual tax returns at their individual tax rates. The vast majority of smaller businesses are pass-through entities. Indeed, over 86% of businesses without employees are sole proprietorships.

https://www.nolo.com/legal-encyclopedia/the-new-pass-through-tax-deduction.html

Unfortunatly, what looked potentially like good news, on the surface:  The Tax Policy Center (TPC) estimated that the bottom 80% of taxpayers (income under $149,400) would receive 35% of the benefit in 2018, 34% in 2025 and none of the benefit in 2027, with some groups incurring costs. TPC also estimated 72% of taxpayers would be adversely impacted in 2019 and beyond, if the tax cuts are paid for by spending cuts separate from the legislation, as most spending cuts would impact lower- to middle-income taxpayers and outweigh the benefits from the tax cuts

IF? So many we're better off not having Cheeto Man in charge and making budget cuts? I really don't know. I'm not going to take sides when what we think or say, makes no difference to the people in power. They give us a tax cut that isn't, but sounds nice and has a pretty name? Deduction

I'll hand the papers to the smart lady, she does all the complicated forms and "ciphering" gets the taxes filed, and she mails back everything. Refund is auto deposit. I'm happy to not have to deal with this personally anymore. Last time I used turbotax I owed more than the accountant costs a year. She's one of my favorite people, once a year.  8)

Anyway, schedule C is our friend.

« Reply #7 on: January 30, 2021, 11:40 »
+2
Its a hood thing for any business owner.  Your business profits get reported on your personal return.  So, instead of getting taxed on $100k, you get taxed on $80k because to the 20% deduction.


 

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