Everything You Need To Know About The QBI Deduction
The QBI deduction can be very beneficial to small business owners and self-employed individuals. Especially during these challenging times, and with tax season approaching, it is essential to understand all tax deductions your business may qualify for.
Here is everything you need to know about the QBI deduction.
What Is The QBI Deduction?
QBI deduction stands for qualified business income deduction. This tax deduction can be utilized by self-employed citizens and small business owners and allows those eligible to deduct up to 20% of qualifying business income from their taxes. To qualify, a person must report business income on their personal tax returns, be a part of an LLC, S corporation, sole proprietorship, or a partnership, and meet specific taxable income thresholds.
The total taxable income limit has increased this year in 2021 and is now $164,900 for single tax filers and $329,800 for married filers. If you are over the income limit, you may still qualify for the QBI deduction if your business is a “SSTB”.
What Is An SSTB?
SSTB stands for specified service trade or business; these businesses include investment managers, medical practices, law firms, and more. Businesses qualify as SSTB if the company depends on the skill of its employees or owners.
What Income Applies For A QBI Deduction?
If a person is interested in applying for a QBI deduction, they must be sure that their reporting also applies. Dividends, interest income, capital gains/losses, business income earned outside of the U.S., wages paid to S corporation shareholders, and more do not qualify. Also, C corporations and people who perform employee services do not qualify.
Be sure to do your research to see how the QBI deduction will specifically affect your business.
Taurus Can Help With Your QBI Deduction
Many factors determine if your business qualifies for a QBI deduction and how deductions will be calculated. Many small business owners are eligible to receive a deduction, but they are unaware of how to take advantage of that, due to the complicated nature of the application process. Many restrictions apply, and this deduction is new, having just been created in 2017, so many may not be aware that it even exists.
If you still have questions about the QBI deduction, Taurus CPA Solutions can help. We have the expertise needed to file your small business taxes accurately and calculate a possible QBI deduction.
Above all, we strive to put your company in the best possible financial position for the remainder of the fiscal year and beyond. Please visit our website today, or give us a call at 410-465-4600 to learn more about how we can help you.