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QBI reduced by SE

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Level 1

I have entered K1 info which includes only rental income, interest income and QBI amounts. The taxpayer also has a Sch C business that creates the only SE tax on the return and qualifies for QBI. When I look at the calculation of the QBI deduction related to the K1 rental income, the deduction is being reduced by a portion of the SE tax. I see the calculation when I scroll down on the Sch K1 worksheet to Section D, Line 5b and c. The line 5 says “Self employed deductions connected to THIS business”. If the SE tax is from the Sch C business and is not related to this rental business why did it populate and reduce the QBI?

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Employee
Employee

It's a bug. I fixed it yesterday and will be in next week's release. In the mean time, you can just zero out those fields. (There's so much ambiguity remaining in the QBI calc that all these fields allow for user entries to replace the default value.)

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5 Replies 5
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Level 15

It wouldn't be right if 1/2 SE tax deduction is allocated to the QBI from K-1 rental.

Allocation of 1/2 SE tax deduction attributable to the respective qualified trade or business is normally done based on share of each qualified ToB's net earnings on Sch SE.  In this case, the K-1 with only rental income would have no income subject to SE tax.

How is PS allocating the 1/2 SE tax deduction to the QBI from K-1?

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Still an AllStar
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Level 1

PS is populating the SE fields on the Sch K1 worksheet section D, it is not something I entered and before I override and remove it I want to be sure that is the right thing to do

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Level 8

Did you link (bottom of K-1 / C) to the same QBI wkst?

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Level 1

I am not sure where to look to answer your question, can you explain a bit more?

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Highlighted
Employee
Employee

It's a bug. I fixed it yesterday and will be in next week's release. In the mean time, you can just zero out those fields. (There's so much ambiguity remaining in the QBI calc that all these fields allow for user entries to replace the default value.)

View solution in original post

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