A taxpayer is a 'Specified Service Trade or Business' (SSTB) with taxable income of $500,000 (Married Filing Jointly). The threshold for the QBI deduction phase-out is $383,900 - $483,900 (hypothetical range for the year). What is the taxpayer's QBI deduction?

Answer options:

20% of QBI.

Limited to 50% of W-2 wages.

A partial deduction based on the phase-out percentage.

How to approach this question

Check SSTB status + Income Level. If SSTB and Income > Upper Limit, Deduction = 0.

Full Answer

A.$0✓ Correct

For a Specified Service Trade or Business (SSTB), the QBI deduction is completely disallowed if taxable income exceeds the upper limit of the phase-out range. Since $500,000 > $483,900, the deduction is $0.

Common mistakes

Applying the wage limitation instead of the total disallowance for high-income SSTBs.

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