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QBI calculation

Level 1

I have a client who is a partner in a law firm and his QBI calculation takes the business income from his 1065 and subtracts a prorated amount of half of his self-employment tax deduction and his retirement contribution.  Why are these two amounts being prorated?  I can not figure out the calculation and there is not a worksheet in Lacerte to show this reduction.

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2 Replies 2
Employee
Employee

Both of those items would be allocated proportionally between any activities with net self-employment income. 

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Employee
Employee

The one-half self-employment tax and retirement contributions deduction will be allocated to the partnership based on the amount of self-employment income minus any guaranteed payments from that partnership. For example, if the partner's total self-employment income from the partnership is $10,000, but there are guaranteed payments of $7,000, then 30% of the one-half self-employment tax and retirement contributions deduction will be allocated to the partnership.

Michael D

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