Qualified Business Income (QBI) Deduction
The Qualified Business Income (QBI) Deduction is a tax deduction available to owners of pass-through entities, such as sole proprietorships, partnerships, S corporations, and some trusts and estates. This deduction allows eligible taxpayers to deduct up to 20% of their qualified business income from their taxable income.
To qualify for the deduction, the business must be a qualified trade or business, and the income must meet specific criteria. The deduction is subject to various limitations, including income thresholds, the type of business, and the nature of the services provided. For example, higher-income earners may face reduced deductions based on the type of business activity.
For instance, if a sole proprietor earns $100,000 in qualified business income, they may be eligible to deduct $20,000 (20% of $100,000), potentially lowering their taxable income and overall tax liability.
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