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Specified Service Trade or Business - QBI

Specified service trades or businesses are usually excluded from the definition of a qualified trade or business income if the taxpayer's taxable income exceeds the applicable threshold.  Thus, no QBI, W-2 wages or UBIA of the qualified property from a specified trade or business is considered when figuring the QBI deduction.  If the specified service trade or business is conducted by a pass-through entity, the same limitations apply to the pass-through items regardless of whether the taxpayer is a passive owner or materially participates in the business.  However, the following exceptions apply:

Exception 1

If the taxpayer’s taxable income before the QBI deduction does not exceed $160,725 if Married Filing Separately, $321,400 if Married Filing Jointly, or $160,700 if Single or Head of Household, the specified service trade or business is considered a qualified trade or business; therefore, it may generate income eligible for the QBI deduction.

Exception 2

If the taxpayer’s taxable income before the QBI deduction exceeds $160,725 but not $210,725 if Married Filing Separately, $321,400 but not $421,400 if Married Filing Jointly, or $160,700 but not $210,700 if Single or Head of Household, an applicable percentage of the specified service trade or business is treated as a qualified trade or business.

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Cathy Fisher

Common Cents Bookkeeping and Tax Preparation

Serving Henderson, NC, Buncombe County, Polk County, Transylvania County

E: cathy@commoncentsqbo.com

P: 828-595-2835

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