Qualified Business Income Deduction

For tax years 2018-2025, small business owners and self-employed taxpayers who earn their income within the US may be eligible for a new tax savings, where they can exclude up to 20% of their business’ qualified taxable income from federal income tax, or 20% of their personal taxable income (whichever is less).

Here are the basic rules determining whether you may qualify:

  1. Your business must be one where taxes are paid by the owners, not the business itself. In general, this means sole proprietorships, self-employed businesses, LLCs, partnerships, S Corporations, estates and trusts qualify, but C Corporations do not.
  2. The taxpayers claiming this deduction must earn under $157,500 if they file single, or $315,000 if they are married filing jointly. That said, taxpayers earning above this threshold may also qualify, but it will be more difficult.
  3. This deduction can be claimed regardless of whether taxpayers take the standard or itemized deductions.

Want to know whether you qualify for this tax savings? Ask your tax prepaper today.

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