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Qualified Business Income Deduction (QBI)

Byadmin

Sep 8, 2023

The qualified business income deduction (QBI deduction) is a tax deduction that allows eligible taxpayers to deduct up to 20% of their qualified business income from their taxable income. The QBI deduction was created by the Tax Cuts and Jobs Act of 2017 (TCJA) and is available to https://eduvenue.com/ sole proprietors, partners, S corporation shareholders, and limited liability company (LLC) members.

To be eligible for the QBI deduction, taxpayers must meet certain requirements, including:

  • They must be a U.S. citizen or resident.
  • They must have a qualified business.
  • Their taxable income must be less than $325,000 for single filers or $650,000 for married couples filing jointly.

The QBI deduction is calculated by multiplying the taxpayer’s qualified business income by the applicable percentage. The applicable percentage is 20% for taxpayers with taxable income less than $157,500 ($315,000 for married couples filing jointly). The applicable percentage is reduced by 50 cents for every $1 of taxable income above $157,500 ($315,000 for married couples filing jointly).

The QBI deduction can be a significant tax savings for eligible taxpayers. However, it is important to note that the deduction is subject to a number of limitations and restrictions. Taxpayers should consult with a tax advisor to determine if they are eligible for the QBI deduction and to calculate the amount of the deduction they can claim.

Here are some of the limitations and restrictions of the QBI deduction:

  • The deduction is only available for qualified businesses. A qualified business is a business that is operated for profit and that is not a specified service trade or business.
  • The deduction is limited to the lesser of the taxpayer’s qualified business income or taxable income.
  • The deduction is phased out for taxpayers with taxable income above certain thresholds.
  • The deduction is not available to taxpayers who are subject to the alternative minimum tax (AMT).

The QBI deduction is a complex tax provision with a number of limitations and restrictions. Taxpayers should consult with a tax advisor to determine if they are eligible for the QBI deduction and to calculate the amount of the deduction they can claim.