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Qualified Business Income Deduction
January 24, 2019   |   Form 1040, IRS, Legislation, Legislative Update, Tax Planning-Business, Tax Resources

man with coffee talking to a woman in a business suit outside building

Are you:

Self Employed?

Receive Limited Liability Company (LLC) Income?

Receive a 1099 Miscellaneous?

Member of a LLC (e. g. Partnership)?

Receive Sub Chapter S Corporation Distributions?

If you answered no to the above questions then QBI does not apply to you. . . If you answered yes, then:

The Qualified Business Income (“QBI”) deduction allows for a deduction of UP TO 20% of the Business Income reported on the business owner’s personal tax return. This deduction lowers taxable income, which lowers the overall Federal Tax due on the tax return. Taxpayer must actively manage the business to qualify for the deduction.  Passive income, rents, wages or guaranteed payments do not qualify in most cases.

If the business is a partnership, the partners split QBI deduction in proportion to their business ownership interest. Deduction deduction calculation is more complicated if the taxpayer’s Form 1040 taxable income is over $157,500 (Single) or $315,000 (Married Joint).

Why don’t corporations (“C Corps”) or corporate earnings qualify for the QBI? Because they receive a different “cookie” in the tax cookie jar: a flat 21% tax rate.

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