Author Topic: 1099 income under the new tax law - tradelines etc.  (Read 797 times)

boarder42

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1099 income under the new tax law - tradelines etc.
« on: January 16, 2018, 03:24:52 PM »
Am I reading this correctly. My 1099 income in 2018 and beyond will be reduced by 20% then taxed.

So if I make 20k per year selling tradelines I'll be taxed on 16k at 22% now

Meaning instead of paying 5k in taxes I now pay 3520. Or a 29.6% savings.  Further compound that with the 20% I can put in my separately IRA. And now I'm paying tax on only 12.8k.

terran

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Re: 1099 income under the new tax law - tradelines etc.
« Reply #1 on: January 17, 2018, 08:53:02 PM »
Pay attention to the service business phaseouts over certain income limits, but basically yes.

Something I haven't found a clear answer on yet is what effect solo 401k or SEP IRA contributions might have on the deduction.

secondcor521

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Re: 1099 income under the new tax law - tradelines etc.
« Reply #2 on: January 17, 2018, 09:28:42 PM »
Am I reading this correctly. My 1099 income in 2018 and beyond will be reduced by 20% then taxed.

So if I make 20k per year selling tradelines I'll be taxed on 16k at 22% now

Meaning instead of paying 5k in taxes I now pay 3520. Or a 29.6% savings.  Further compound that with the 20% I can put in my separately IRA. And now I'm paying tax on only 12.8k.

Regarding your last paragraph, I'm not 100% sure, but it looks like you would reduce the $20K of income by the $4K into your IRA first, resulting in net QBI of $16K, then take the 20% passthru deduction on that $16K, or $3.2K, for a taxable income on that part of $12.8K, which at 22% would be a tax bill of $2816.

Lengthy but reasonably clear Forbes article here:  https://www.forbes.com/sites/anthonynitti/2017/12/26/tax-geek-tuesday-making-sense-of-the-new-20-qualified-business-income-deduction/#562e944d44fd

MDM

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