Textbook Tax

You may claim the home office deduction on your tax return if you used part of your home for business. U.S. tax law allows you to deduct expenses related to the business use of your home on your tax return. The tax deduction applies to both homeowners and renters as well as all types of homes. You determine the amount of expense related to business use based on a standard rate provided by the IRS or a calculated rate established by the percentage of your home utilized specifically for business. The two requirements to claim the home office tax deduction include: (1) regular and exclusive use and (2) principal place of your business. Because the COVID-19 pandemic required millions of people to work from home during 2020, many people are wondering if they can claim the home office tax deduction on their 2020 tax return. Below, I will explain in detail the home office deduction requirements to help you determine if you can deduct home office expenses on your tax return. Fair warning,...

If you have not read my initial post on the Sec. 199A QBI deduction, please do so now. Follow the link HERE . If you were directed from the original post, please continue to read on. TCJA enacted the Sec. 199A QBI deduction. The deduction allows eligible taxpayers to deduct up to 20% of their qualified business income. Sec. 199A places several limitations on the deduction based several factors, including taxable income and business category type (QTB vs. SSTB). The purpose of this post is to explain and provide an example relating to taxpayers with taxable income between the threshold amounts. Depicted below are the 2019 single and married filing jointly taxable income thresholds relating to the QBI deduction: For 2019, the depicted taxable income thresholds will apply for the QBI deduction calculation. For taxable incomes between the threshold amounts (if single, $160,700 – $210,700), special and complex rules apply. In my previous Sec. 199A QBI post, I grouped taxpaye...

The Tax Cuts and Jobs Act (TCJA) of 2017 enacted the IRC Sec. 199A qualified business income (QBI) deduction. The QBI deduction allows a deduction of up to 20% of qualified business income for eligible flow-through entities. The deduction is available to all taxpayers other than regular C Corps. The QBI deduction is taken from AGI. What is qualified business income? QBI is ordinary, trade & business income minus ordinary deductions earned by flow-through entities (sole proprietorship, S Corp, LLC, or partnerships). Compensation (wages, guaranteed payments, etc.) and separately stated items (dividends, interest, capital gains) are not includable in QBI. What flow-through entities are eligible? Sec. 199A classifies two types of eligible flow-through entities: Qualified Trade or Business (QTB) and Specified Service Trade or Business (SSTB). The IRC defines QTB as any other business other than a SSTB (real helpful!). Examples of QTB include engineering businesses and ...