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Level 2
February 4, 2019

Sec 199A: QBI Deduction IRA vs SEP Contribution

  • February 4, 2019
  • 2 replies
  • 37 views

Schedule C client with moderate profit--$40,000

An IRA is a higher amount for client than a SEP.

Smart worksheet in Section E: Line 6E: S.E. Retirment deduction connected to business will input a SEP contribution (which lowers the calculation) but it excludes an IRA.

The result with an IRA is a higher QBI dedcution. I've reviewed the regs with no success.

Any input would be appreciated

This topic has been closed for replies.

2 replies

IntuitJim
Level 5
February 14, 2019

Yes, making an IRA contribution will not reduce QBI but a SEP contribution will. So in your situation, the IRA contribution may yield a higher QBI deduction.  The final regs reduced QBI by 1/2 Self-employment tax, Self-employed health insurance and Self-employed retirement contributions. More here 

https://accountants-community.intuit.com/articles/1798095&src=51247 

Level 2
February 16, 2019

That is the correct computation.  A "company" plan such as a SEP or solo 401k will lower the QBI, whereas an IRA contribution will not.  I believe this was clarified in the final regs released last month.