1099 income under the new tax law - tradelines etc.

[boarder42]

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]

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]

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]

QBI Pass-through deduction in the case study spreadsheet might be useful.