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Qualified business and combined W-2 & 1099

Home Tax Reduction Qualified business and combined W-2 & 1099

  • Avatar drlakkim 
    Participant
    Status: Physician
    Posts: 4
    Joined: 02/06/2019

    In short, income on W-2 is 271,000 and from 1099 is 220k. Total income is 490 K,

    Adjusted gross income is 440k.

    My Tax numbers, this year are almost similar to last year, with a difference of about 5k, which I can attribute to increase standard deduction.

    My question is can my 220k from 1099. can be claimed under qualified business income and get 20% deduction or my total AGI is taken into consideration as 440k, without any benefit from 20% deduction.

    I do understand for Married filing jointly, max benefit from 20% deduction on business income is up to 315 k.

     

    Thanks

    #188538 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7797
    Joined: 01/09/2016

    It’s your taxable income (not AGI) that matters. Your contribution to a solo-k (or SEP if not set up before 12/31/19) will reduce your taxable income to the phase-out limit. If you have a 401k at work, all the better. Same for HSA. You surely have some business deductions to reduce your 1099 income, also.

    See this post: How to Maximize Your Section 199A Deduction

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #188544 Reply
    Avatar drlakkim 
    Participant
    Status: Physician
    Posts: 4
    Joined: 02/06/2019

    Thank you for your response. Per your response, my  Taxable income above is 491 K ( AGI is 441k) which is more than 315 to 415 k range to claim pass thru deduction. I did use SEP IRA deduction from 1099 (220K).  But I also thought that under new Tax act, 1099 income( 220K) can claim 20 Percent deduction.

    #189103 Reply
    Avatar davidlg16 
    Participant
    Status: Physician
    Posts: 8
    Joined: 03/19/2017
    alpha investing

    I’m also interested in the response, 199a refers to “business income”… is the W2 income from another job (NOT a S Corp paying self) considered part of the individual’s business income or only the 1099 portion?

    #189163 Reply
    Avatar Doc29 
    Participant
    Status: Physician
    Posts: 28
    Joined: 12/18/2016

    I was told the answer is no you can’t claim the 20%, since your total income would exclude you. Of course I’m not sure if anyone really understands this point so I could have gotten incorrect advice.

    #189180 Reply
    Avatar Doc29 
    Participant
    Status: Physician
    Posts: 28
    Joined: 12/18/2016

    Also does anyone know if the TurboTax software has factored in the 20% reduction.

    #189181 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7797
    Joined: 01/09/2016

    Thank you for your response. Per your response, my  Taxable income above is 491 K ( AGI is 441k) which is more than 315 to 415 k range to claim pass thru deduction. I did use SEP IRA deduction from 1099 (220K).  But I also thought that under new Tax act, 1099 income( 220K) can claim 20 Percent deduction.

    Click to expand…

    If your $220k is Qualified Business Income, then it is included in the taxable income calculation to determine if you are above the threshold. If your $220k is from your side hustle as a drug rep, for example, then it is not QBI and qualifies for section 199a.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #189226 Reply
    Avatar drlakkim 
    Participant
    Status: Physician
    Posts: 4
    Joined: 02/06/2019

    Thanks. My 1099 (220K is  doing expert witness, case reviews, locums, IME, peer reviews) as an independent contractor which I consider as Medical services and a QBI.  So, it will be added to my taxable income along with my W2 from another job and make me above threshold?

    I have tried thru turbo tax this year and an never got 20% deduction option and m numbers almost similar to last year

     

     

     

    #189231 Reply
    Avatar drlakkim 
    Participant
    Status: Physician
    Posts: 4
    Joined: 02/06/2019

    I am still not clear. To make it simple, I am employed by a hospital and my income  on W-2 is 271,000 .

    In addition, I have a side gig and My 1099 as a sole proprietor (220K is  doing expert witness, case reviews, IME, peer reviews) as an independent contractor which I consider as Medical services. I am going to deduct SEP irs 43k from this.

     

    My question is, since my 220k from 1099. is a business and I am sole proprietor and can I claim 20% deduction on it?.

    I do understand for Married filing jointly, max benefit from 20% deduction on business income is up to 315 k(here my business income is less than 220k).

     

    Thanks

    #190598 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1793
    Joined: 02/01/2016

    As jfoxcpscfp already explained to you in her most recent post, the QBI thresholds and phaseouts for SSTBs is based on your total taxable income not just the businesses income.

    If more than 10% of your total 1099 revenue is from medical services, then your business is an SSTB and you are subject to the QBI thresholds/phaseouts.

    You indicated that your AGI is $440K, therefore your taxable income will be $440K – either the standard deduction or itemized deductions. You will only qualify for the QBI to the degree that is below $415K, with the adjustments on the QBI worksheet.

     

    #190613 Reply
    Liked by drlakkim

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