Intuit Academy Tax Practice Exam

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Enhance your tax preparation skills with the Intuit Academy Tax Exam. Study with comprehensive quizzes and detailed explanations. Prepare for success today!

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How much of Renaldo's income is subject to the Qualified Business Income (QBI) deduction?

$2,295
$5,541
$4,000
$3,200

The correct answer is: $5,541

The Qualified Business Income (QBI) deduction, established under the Tax Cuts and Jobs Act, allows eligible taxpayers to deduct up to 20% of their qualified business income from a qualified trade or business. To determine how much of Renaldo's income is subject to the QBI deduction, one must first calculate his qualified business income and then apply the appropriate limits and calculations dictated by the tax code. In the scenario where the answer is $5,541, it likely indicates that Renaldo's qualified business income, after taking into account any applicable thresholds, is structured such that 20% of this income equals $5,541. This may represent a straightforward calculation based on his business income, minus any applicable losses or other deductions, aligned with the QBI criteria. The other options represent different calculations or interpretations of the QBI, which may not take into account all the relevant factors or may reflect incorrect amounts derived from the QBI formula, thresholds, or income limits established for particular taxpayer scenarios.