What is Qualified Business Income (QBI)?
Qualified business income (QBI) is a type of income that is generated from a qualified trade or business http://Recallbusiness.com , such as a sole proprietorship, partnership, S corporation, or limited liability company (LLC). QBI is taxed as ordinary income on your individual income tax return, but it may be eligible for a deduction under Section 199A of the Internal Revenue Code.
Who Qualifies for the QBI Deduction?
The QBI deduction is available to taxpayers who meet the following requirements:
- They must have ownership interest in a qualified trade or business.
- Their taxable income must be below certain thresholds.
- Their business must not be a C corporation.
- Their business must not be a specified services trade or business (SSTB).
How Much of the QBI Deduction Can I Claim?
The amount of the QBI deduction that you can claim is limited to 20% of your QBI. However, there are a few things that can reduce your deduction, such as your taxable income, your net capital gain, and the amount of your W-2 wages.
How Do I Calculate My QBI?
To calculate your QBI, you will need to add up all of the following items:
- Your business’s net income
- Your business’s deductions
- Your share of the income and deductions from any partnerships or S corporations in which you own an interest
- Your share of the income and deductions from any trusts or estates in which you own an interest
What Are the Benefits of the QBI Deduction?
The QBI deduction can provide a significant tax savings for small business owners. For example, if you have $100,000 in QBI, you could claim a deduction of $20,000. This would reduce your taxable income by $20,000 and could save you hundreds or even thousands of dollars in taxes.
How Do I Claim the QBI Deduction?
You claim the QBI deduction on Schedule 1 of Form 1040. You will need to provide information about your business’s income, deductions, and ownership interest.
The QBI deduction is a valuable tax break for small business owners. If you are eligible for the deduction, you should claim it to reduce your tax liability.
Here are some additional resources that you may find helpful:
- IRS Publication 535, Business Expenses: https://www.irs.gov/publications/p535
- IRS Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts: https://www.irs.gov/publications/p536
- IRS Publication 583, Starting a Business and Keeping Records: https://www.irs.gov/publications/p583
I hope this article has been helpful. Please let me know if you have any other questions.