Qualified Business Income

3 Replies

This new QBI tax break is great but very confusing. Here's the deal. My main day job is as a 1099 IC doctor. I am actively involved in real estate investment and self manage my 11 units, interacting with tenants often. I definitely took the QBI for my real estate activity as I am actively involved, including in accounting for them, deposits, tenant interaction, even some maintenance or fielding the maintenance out (real estate in sole member LLC)

For 2018 taxes, do both jobs count as QBI? The physician job I am paid an hourly rate that includes malpractice. Once I deduct the malpractice and get my SEP, HSA, and other deductions, I fall below the married filing joint threshold of 315k. 

Any CPAs out here specialized in working with doctors? I do have my own CPA but he seems to be confused on this himself and told me he needs to research it. I am thinking about switching to a CPA who specializes in working with doctors. 

Can I take the 20% QBI deduction as a physician employed as an IC in my own name since that is my own trade? There seems to be some confusion as to whether healthcare is excluded from the QBI criteria....

@Paul Passafiume

Hi Paul, no one is excluded per se, but can be limited by profession and potentially by other limiting factors, i.e. wages, unadjusted cost basis, etc. So the simple answer is yes, your business as a doctor does qualify before other limitations.

The fact that you operate as an IC, you are probably operating a trade or business that qualifies potentially for the QBI deduction again you need to look at limiting factors. The net income of your business, less certain deductions will be the QBI that is used for the 20% calculation. Also, the calculation itself is going to be a combination of all trades or businesses, including real estate combined.

If you're looking to be more informed on the QBI deduction and how it affects real estate, look to the recent guidance that was issued last week about who can take the deduction for those involved in real estate.

Ok....so I am MFJ, and my AGI is 300k to keep it simple. If I am an IC physician and that is my main trade/skill, but my other trade and skill is real estate (I typically spend 3 days a week involved in each), is that a QBI as a doctor?

It's EXTREMELY confusing and very poorly written law. The thing that raises red flags is my CPA last year must not have planned for me to get that deduction because he waaaaaaaay overestimated my taxes. Thus it looks as if I am owed a massive refund due to the QBI.

@Paul Passafiume

You're spot on Paul, and congratulations for getting yourself educated on the law and the potential for imitations for "specified service trades or businesses."

At $300k income, MFJ, you dont have to concern yourself with wage limitations, or the limitations on the SSTB's.

To give your current accountant a little leeway, I would say in March/April of last year not a lot was known about who would or wouldnt get the deduction so the conservative planning option was not to assume a full 20% deduction. This is the same time frame lawyers were trying to split their businesses into 3 different companies to try and get a portion of the deduction (didn't end up working). Even some of the final regs didn't get released until last week, so it's been tough to plan for.