What is the QBI deduction, and how can it help you save on your taxes?

Core Concept - The article discusses the Qualified Business Income (QBI) deduction, which allows eligible self-employed individuals and small business owners to deduct up to 20% of qualifying business income on federal income taxes, as part of the 2017 Tax Cuts and Jobs Act [3][15]. Summary by Sections QBI Deduction Overview - The QBI deduction is a provision that reduces taxable business income, potentially leading to a lower tax burden or larger refund [3]. - It is available regardless of whether taxpayers itemize deductions or take the standard deduction [3]. Eligibility and Income Limits - Eligible self-employed professionals and small business owners can claim the QBI deduction, with specific income limits set at $394,600 for married couples filing jointly and $197,300 for single filers [8]. - Specified service trades or businesses (SSTBs) may qualify for a reduced deduction if their income is below $247,300 for single filers and $494,600 for joint filers [9]. Qualified Business Income Definition - Qualified business income is defined as the net amount of income, gain, deduction, and loss from any qualified trade or business, excluding certain types of income such as capital gains, interest income, and wage income [5][7]. Calculation of QBI Deduction - For businesses with income below the specified thresholds, the QBI deduction is calculated by multiplying the total qualified business income by 20% [12]. - For SSTBs above the income threshold, the deduction may be phased out and calculated based on W-2 wages and qualified property [14]. Duration of QBI Deduction - The QBI deduction was enacted in 2017 and is available through the 2025 tax year, with the One Big Beautiful Bill Act making it permanent [15].