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:
- 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.
- 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.
- 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.