Hi MDM. I'm just poking around with your spreadsheet... two initial questions and a comment.#1 - Great question, and I should have been more explicit. The result is in Calculations!G14. The 3 inputs that don't come from inputs needed for "regular" tax calculations are in Calculations!Y140:Y142.
Question #1: Where does the QBID number show up? Sorry, I looked but I am missing it.... Ugh.
Question #2: Is your idea that S corporation and partnership distributive shares (i.e., owner profit allocations) can lumped with the rental income and expense? BTW this would probably work... (you could even throw REIT dividends into this.)
Comment: Not sure you want to go there, but I did describe how the qualified cooperatives Sec. 199A, or qualified business income, deduction works here:
https://evergreensmallbusiness.com/sec-199a-technical-corrections-fix-grain-glitch/
Er, surely you have better ways to spend your time. Unless you're a farmer.
#2 - Haven't decided the best way to use REIT income. E.g., it could be a separate line item for the "regular" tax input (which could require folks to separate their 1099 numbers) or a separate input in the QBI calculation block (which could lead to confusion about whether it should be entered in two or only one place).
For rental income, do you expect one can use net income from schedule E (which includes the depreciation subtraction), and if so how losses will be treated? I pretty much decided to punt on this until IRS guidance arrived, but if you have (or anyone has) a very good idea of what is coming, that would be great.
As for (what I perceive as) the more complicated S Corp and partnership issues, well, I'm not trying to compete with the TurboTax, etc., folks, nor even with the gentleman who does Federal Income Tax Form 1040 (Excel Spreadsheet) Income Tax Calculator (https://sites.google.com/site/excel1040/). The original purpose of the Case Study Spreadsheet was to help people with the simple math of adding expenses and estimating net income. Over time, the tax calculations have evolved into (what I think is) a pretty decent system for evaluating both tax due and the marginal rates one pays (or saves) along the way - for individuals with primarily W-2 and 1099 income.
I think I had read something and assumed I didn't qualify for this - then today it came up again, and now it is like what?...and just happened to be reviewing this very thing. At one point it seemed the term "taxable income" (e.g., see https://www.irs.gov/pub/irs-drop/reg-107892-18.pdf) would be the same as "Adjusted Gross Income" (AGI). But, although I've yet to find a specific IRS definition as it applies to QBI, posts such as Rules For Deducting Qualified Pass-Through Business Income (https://www.kitces.com/blog/pass-through-business-deduction-rules-qualified-business-income-qbi-limits/) lead me to believe "taxable income" for QBI purposes is "AGI minus the standard (or itemized) deduction."
I feel like we're high income and I'm definitely in a service business, but we are decidedly not over the MFJ limit for this - I can shelter 18K + 20% into the soloK, and then take another 20% off? Seriously?
Of course MDM has already put this into the spreadsheet.
I think I had read something and assumed I didn't qualify for this - then today it came up again, and now it is like what?...and just happened to be reviewing this very thing. At one point it seemed the term "taxable income" (e.g., see https://www.irs.gov/pub/irs-drop/reg-107892-18.pdf) would be the same as "Adjusted Gross Income" (AGI). But, although I've yet to find a specific IRS definition as it applies to QBI, posts such as Rules For Deducting Qualified Pass-Through Business Income (https://www.kitces.com/blog/pass-through-business-deduction-rules-qualified-business-income-qbi-limits/) lead me to believe "taxable income" for QBI purposes is "AGI minus the standard (or itemized) deduction."
I feel like we're high income and I'm definitely in a service business, but we are decidedly not over the MFJ limit for this - I can shelter 18K + 20% into the soloK, and then take another 20% off? Seriously?
Of course MDM has already put this into the spreadsheet.
Enough things have accumulated that I'll probably upload a new version sometime soon. Meanwhile, if one wants to use "AGI minus deduction", simply change cell Y134 from =G11 to =G11-G13.
I thought I also saw something that indicated capital gains wouldn't be included either? So AGI minus deductions minus capital gains. I don't have a source for this, but it was probably from the guidance published in early August or from commentary on that guidance.Thanks - a capital gains deduction is already in the spreadsheet. Whether it is in there correctly...? All I know for now is that the spreadsheet matches all the relevant examples I've been able to find.
B and C are married and file a joint individual income tax return. BThat's a lot of "allowable deductions" but with enough charitable contributions, etc., ....
earned $500,000 in wages as an employee of an unrelated company in 2018.
C owns 100% of the shares of X, an S corporation that provides landscaping services. X
generated $100,000 in net income from operations in 2018. X paid C $150,000 in
wages in 2018. B and C have no capital gains or losses. After allowable deductions
not related to X, B and C’s total taxable income for 2018 is $270,000.
I'm sorry, I have clicked on your spreadsheet a half a dozen times,It definitely works better in Excel than in Sheets. See Any Google Sheets knowledge? (https://forum.mrmoneymustache.com/ask-a-mustachian/any-google-sheets-knowledge/msg1857653/#msg1857653)
finally today, I notice the 'Open with Google sheets' at the top.
Oh finally I'll be able to use this. Nope the google sheet opens,
and I still have no idea what to do.
First line says use the Calculations Tab, Ok, where is that.
Can someone walk me through this?
OK, that's better I have more working knowledge with Excel than sheets.I'm sorry, I have clicked on your spreadsheet a half a dozen times,It definitely works better in Excel than in Sheets. See Any Google Sheets knowledge? (https://forum.mrmoneymustache.com/ask-a-mustachian/any-google-sheets-knowledge/msg1857653/#msg1857653)
finally today, I notice the 'Open with Google sheets' at the top.
Oh finally I'll be able to use this. Nope the google sheet opens,
and I still have no idea what to do.
First line says use the Calculations Tab, Ok, where is that.
Can someone walk me through this?
It opens in the Instructions tab. The Calculations tab is the second one from the left - see the bottom of your screen.
At this point we have more or less reached the end of my Google Sheets knowledge....
Now that I have it open- WOW, you have put a lot in there!Row 30: Schedule C net profit.
I don't see a specific schedule C income goes here line, do I just put net income into the
Gross salary line?
Yep found it,SEP contributions could be included in row 48, Traditional IRA. Note that no check is made to enforce compliance with the various IRS rules on IRA, 401k, HSA, etc. contributions, so having a number >$5500 there will work.
How about SEP contributions?
And where does my healthcare insurance deduction go?If pre-tax cafeteria plan, in row 4. If post-tax, in row 113.
Cell B72 has $6,434 in it, I don't know why, zeros in 68 thru 71?Row 72 is your after-tax income.
How about SEP contributions?QuoteSEP contributions could be included in row 48, Traditional IRA. Note that no check is made to enforce compliance with the various IRS rules on IRA, 401k, HSA, etc. contributions, so having a number >$5500 there will work.
Will it calculate properly if I add my max IRA and Max SEP contributions and put the sum in row 48?
I find this, "You can contribute up to 20 percent of your "adjusted net earnings" from self-employment to a SEP"
What line is my "adjusted net earnings"?QuoteCell B72 has $6,434 in it, I don't know why, zeros in 68 thru 71?QuoteRow 72 is your after-tax income.
Oh, sorry, I see it now, that is a monthly number.
Will it calculate properly if I add my max IRA and Max SEP contributions and put the sum in row 48?I believe so.
I find this, "You can contribute up to 20 percent of your "adjusted net earnings" from self-employment to a SEP"Don't know - haven't had this question before now. ;)
What line is my "adjusted net earnings"?
I don't know where that page is but, it was not accurate.Will it calculate properly if I add my max IRA and Max SEP contributions and put the sum in row 48?I believe so.QuoteI find this, "You can contribute up to 20 percent of your "adjusted net earnings" from self-employment to a SEP"Don't know - haven't had this question before now. ;)
What line is my "adjusted net earnings"?
If you can find a definition for "adjusted net earnings" we may be able to determine what existing line fits this, or perhaps add a calculation for it.
If I add $60,000 of LTCG, the spreadsheet only adds $1,223 tax, or 2% on $60,000. Seems like it should add 0% or 10% or 15%, not 2%. Doesn't seem right, MDM, if you are interested, private message me and I'll send a copy for you to look at.
If I add $60,000 of LTCG, the spreadsheet only adds $1,223 tax, or 2% on $60,000. Seems like it should add 0% or 10% or 15%, not 2%.I'd be happy to look at it - you could save it to a Google Drive and PM the URL.
Doesn't seem right, MDM, if you are interested, private message me and I'll send a copy for you to look at.
Cell G23 gives me a $400 Savers Credit, what triggered that?See cells U53:W63 for the Form 8880 (https://www.irs.gov/pub/irs-pdf/f8880.pdf) (aka Saver's Credit) calculations.
I do have an HSA, SEP and IRA.
I figured it out, an 'HSA' (cell A45) will trigger the savers credit (cell G23)
and also 'alimony paid' (Cell A47) will trigger the 'savers credit'.
I put my SEP in 'alimony paid' (Cell A47) it doesn't alter the savers credit but would, if I didn't already have
the HSA.
That's a note to self and others.
If I add $60,000 of LTCG, the spreadsheet only adds $1,223 tax, or 2% on $60,000. Seems like it should add 0% or 10% or 15%, not 2%. Doesn't seem right, MDM, if you are interested, private message me and I'll send a copy for you to look at.
Probably a weighted average. $51850 at 0% plus 15% of $8150 or some such.
$11,830---$1614 $400 tax on $5 more??Probably losing eligibility for a saver's credit tier. Saver's credit tiers are based on AGI, regardless of whether the income is ordinary or LTCG.
$54,065---$1614Reaching the point at which LTCGs become taxable?
$54,070---$1615
$60k---$2504
Oh, very good sleuthing, thanks for your input.$11,830---$1614 $400 tax on $5 more??Probably losing eligibility for a saver's credit tier. Saver's credit tiers are based on AGI, regardless of whether the income is ordinary or LTCG.Quote$54,065---$1614Reaching the point at which LTCGs become taxable?
$54,070---$1615
$60k---$2504
Oh, very good sleuthing, thanks for your input.Yes, cell D31.
I'll need to check all my income numbers again at the start of December,
but it looks like I can realize about $54,000 in LTCGs and only pay $400 additional tax or 0.8%.
Is there any line for a Roth conversions or would that just go in Cell D31 'tIRA distributions'?
If yes, I could do a $50,000 Roth conversion paying 10% tax and take a $20,000 LTCGSee below.
and pay 4% tax, or $30,000 at 7% or $50,000 and pay 10% tax.
Your thoughts?
EDIT for additional question.Yes.
I just checked and about 55% of the money in my regular savings (not tax defered) is Long Term Gain.
So, am I correct that I could withdraw $100,000 and show $55,000 of LTCGs in Cell D27.
Does anyone want to humor me and dumb this all down a lot, using a round number scenario?
Assume:
LLC: $50k QBI (revenue-expenses)
Rental: -$20k (major required repairs this year)
W2 Gross: $70k
401K Contributions: $6k
Roth IRA: $5.5k
4 kids, 2 adults, standard deduction
@MMbergmann thank you and disclaimer acknowledged.Are you trying to use Excel or some other spreadsheet program to open the file? Excel does work better than Sheets, LibreOffice, etc.
I was assuming that is how it worked but I was hoping somebody would confirm without me messing it up by trying to explain what I thought. I have not been able to get the spreadsheet to open for me to use our real/estimated numbers so I appreciate the explanation.
Also as a note, I assumed his LLC was an S-corp (since he also had wages), thus why I didn't do anything with SE tax.
Thank you for your work! I find this MUCH easier to use for planning vs H&R Block 2018 Premium I just purchased.Short answer: G14 (in the most recent version). The QBI deduction (aka pass-through deduction) comes after the standard or itemized deduction from adjusted gross income. See rows 7-10 on https://www.irs.gov/pub/irs-dft/f1040--dft.pdf.
Few questions if I may
1) Where is QBI used in calculations? I see Y150 where I have the number of deduction calculated for me and wonder where is it adjusting my income on the main spreadsheet?
2) What is the difference between Line 7 (Employee Sponsored HSA) and line 45 (Personal HSA)? I.e. I set aside $6900 per year to be subtracted from my paycheck and transferred to HSA provider automatically which I can then spend/invest/etc. is this Employee Sponsored or Personal HSA?Line 7 is the employer sponsored HSA. That is HSA money the employer deducts directly from your paycheck, and it appears this is your situation. When this happens, you don't pay FICA tax on the HSA amount.
My situation - MFJ, 40/41, 2 dependents (3,6), 8k in childcare expensesIf I understood correctly (see below to check), you are firmly within the 22% federal marginal rate. For most people, that would indicate traditional contributions are likely better than Roth. All depends on what marginal rate you expect to pay on withdrawals from traditional accounts after retirement. Good luck!
person1: 93k salary this year - 18.5k 401k -2k healthcare plans -5k Daycare FSA
person2: 36k salary -10k 403b - 1k healthcare plans
qualified dividends -15k
LTCG - 10k
business income - expenses is 130k total (65k assigned to each). sole proprietorship
i have solo 401k plan which I can do match and roth contributions to the limit, i.e. below (have not done it yet)
Line 47 person 1 - 12k profit share (25% of the net business income), person 2 -20k (8k employee contribution +12k profit share )
Federal income tax paid already - 5k from paychecks + 25k total from self employments to cover FIT and FICA
Need to look at what ratio to fund 401k plan , whether to put TIRA or Roth, whether I would need to pay more estimated taxes for Q4 2018 come 2019
Thank you
Paycheck frequency: | Annual | Annual | |
Paycheck Items | Earner #1 | Earner #2 | Annual |
Gross Salary/Wages | $93,000 | $36,000 | $129,000 |
Pretax Health/Dental/Vision Ins. | $2,000 | $1,000 | $3,000 |
Daycare FSA | $5,000 | $0 | $5,000 |
FICA base salary/wages | $86,000 | $35,000 | $121,000 |
401(k) / 403(b) / TSP / etc. | $18,500 | $10,000 | $28,500 |
W-2 Box 1 | $67,500 | $25,000 | $92,500 |
Non-paycheck income | Annual | Annual | Annual |
Qualified dividends | $15,000 | $15,000 | |
Long term capital gains (LTCG) | $10,000 | $10,000 | |
Schedule C net profit | $65,000 | $65,000 | $130,000 |
1040 Total Income | $157,500 | $90,000 | $247,500 |
Subtractions for AGI | Annual | Annual | Annual |
Deductible SE tax | $3,499 | $4,592 | $8,091 |
Self-employed SEP, SIMPLE, etc. | $12,000 | $20,000 | $32,000 |
1040 AGI | $207,409 | ||
Payroll Taxes | Annual | Annual | Annual |
Social Security | $5,332 | $2,170 | $7,502 |
Medicare | $1,247 | $508 | $1,755 |
Income Taxes | |||
Federal tax | $20,759 | 2018, MFJ, std., 2 dep | $20,759 |
Self-employment Tax | $6,998 | 9184.2075 | $16,183 |
Total income taxes | $46,198 | $46,198 | |
Monthly | |||
Add Health + Daycare reimb. | $417 | 0 | $5,000 |
Income before other expenses | $14,525 | $174,302 |
Filing Status | 2 | 1=S, 2=MFJ, 3=HOH | |
# Dependents | 2 | ||
# Children <17 | 2 | ||
# Children <13 | 2 | ||
# Children for EIC | 2 | ||
Adult #1 | Adult #2 | ||
Age | 40 | 41 | |
Full-time student? | 0 | 0 | |
AGI | $207,409 | ||
Std. Deduct. | $24,000 | ||
Act. Deduct. | $24,000 | ||
Pass-thru deduct. | $26,000 | ||
Taxable | $157,409 | ||
1040 Tax | $24,759 | ||
Non-refund. CTC | $4,000 | ||
Tax after n-r credit | $20,759 | ||
Net Tax | $20,759 | ||
Version | V11.19 |
Line 7 is the employer sponsored HSA. That is HSA money the employer deducts directly from your paycheck, and it appears this is your situation. When this happens, you don't pay FICA tax on the HSA amount.
Some people don't have the HSA amount deducted directly from their paycheck, usually because the employer doesn't provide the option. They can still make a "personal" HSA contribution (e.g., by sending a check to an HSA provider) and get the HSA deduction on income tax, but the HSA amount is not deducted from the wage base used for FICA tax.
Perhaps B7 is set to receive an annual amount, while B45 is monthly? E.g., if you enter =6900/12 in B45 does that give ~the same result as 6900 in B7?Line 7 is the employer sponsored HSA. That is HSA money the employer deducts directly from your paycheck, and it appears this is your situation. When this happens, you don't pay FICA tax on the HSA amount.
Some people don't have the HSA amount deducted directly from their paycheck, usually because the employer doesn't provide the option. They can still make a "personal" HSA contribution (e.g., by sending a check to an HSA provider) and get the HSA deduction on income tax, but the HSA amount is not deducted from the wage base used for FICA tax.
Thank you. Any idea of why such a difference with FIT results depending on whether I enter the same amount (6900) in line B7 or line B45? Shouldn't it be essentially the same for income tax purposes? line B7 reduces FICA base while line B45 reduces AGI post calculations.
Both are annual if I read it correctly... may be a bug in a formula?Bugs are always possible, but I'm not seeing what you describe. Below is what I see for a quick example. If you use the same $50K gross income for each, what do you get when the $6900 HSA is in
Line C7 and C45 work exactly the same in terms of FIT reduction
Line B7 and B45 does not give the same benefits (B7 does not reduce FIT anywhere near the same as C7)
I use v11.18
Thank you
Paycheck frequency: | Annual | Annual | |
Paycheck Items | Earner #1 | Earner #2 | Annual |
Gross Salary/Wages | $50,000 | $50,000 | $100,000 |
Employer-sponsored HSA | $6,900 | $0 | $6,900 |
FICA base salary/wages | $43,100 | $50,000 | $93,100 |
W-2 Box 1 | $43,100 | $50,000 | $93,100 |
1040 AGI | $93,100 | ||
Payroll Taxes | Annual | Annual | Annual |
Social Security | $2,672 | $3,100 | $5,772 |
Medicare | $625 | $725 | $1,350 |
Income Taxes | |||
Federal tax | $7,911 | 2018, MFJ, std. | $7,911 |
Total income taxes | $15,033 | $15,033 |
Filing Status | 2 | 1=S, 2=MFJ, 3=HOH | |
Adult #1 | Adult #2 | ||
Age | 35 | 35 | |
Full-time student? | 0 | 0 | |
AGI | $93,100 | ||
Std. Deduct. | $24,000 | ||
Act. Deduct. | $24,000 | ||
Pass-thru deduct. | $0 | ||
Taxable | $69,100 | ||
1040 Tax | $7,911 | ||
Tax after n-r credit | $7,911 | ||
Net Tax | $7,911 | ||
Version | V11.18 |
Paycheck frequency: | Annual | Annual | |
Paycheck Items | Earner #1 | Earner #2 | Annual |
Gross Salary/Wages | $50,000 | $50,000 | $100,000 |
W-2 Box 1 | $50,000 | $50,000 | $100,000 |
Subtractions for AGI | Annual | Annual | Annual |
Personal HSA | $6,900 | $0 | $6,900 |
1040 AGI | $93,100 | ||
Payroll Taxes | Annual | Annual | Annual |
Social Security | $3,100 | $3,100 | $6,200 |
Medicare | $725 | $725 | $1,450 |
Income Taxes | |||
Federal tax | $7,911 | 2018, MFJ, std. | $7,911 |
Total income taxes | $15,561 | $15,561 |
Filing Status | 2 | 1=S, 2=MFJ, 3=HOH | |
Adult #1 | Adult #2 | ||
Age | 35 | 35 | |
Full-time student? | 0 | 0 | |
AGI | $93,100 | ||
Std. Deduct. | $24,000 | ||
Act. Deduct. | $24,000 | ||
Pass-thru deduct. | $0 | ||
Taxable | $69,100 | ||
1040 Tax | $7,911 | ||
Tax after n-r credit | $7,911 | ||
Net Tax | $7,911 | ||
Version | V11.18 |