Understanding the Qualified Business Income Deduction for Small Business Owners

Are you maximizing your tax savings with the QBI deduction? 

In this episode, Mike delves into the intricacies of the Qualified Business Income (QBI) deduction, also known as the Section 199A deduction, which was part of the Tax Cuts and Jobs Act. He explains the basic rules and income thresholds, discusses which types of income qualify, and provides details on how to calculate the deduction. Additionally, he addresses the expiration of the QBI deduction after 2025 and clarifies that the deduction is taken on personal tax returns, not business returns.

Discover the key rules and strategies to ensure you're not leaving money on the table by tuning in!

[00:00 - 05:21] Introduction to QBI Deduction

• Mike gives an overview of the QBI deduction and its origin in the Tax Cuts and Jobs Act.
• General rule: Deduct up to 20% of qualified business income.
• Types of businesses that qualify: sole proprietorships, LLCs, S corporations, and partnerships.

[05:22 - 10:10] Non-Qualifying Income and Income Thresholds

• Mike explains the income types that do not qualify for QBI: investment income, wage income, and income from C corporations.
• Income thresholds for 2024: $191,950 for singles and $383,900 for married couples.
• Calculation changes for those above income thresholds.

[10:11 - 15:00] Specified Service Trade or Business (SSTB)

• Mike defines SSTBs and gives examples such as healthcare, law, financial services, athletics, performing arts, accountants, and consultants.

[15:01 - 20:20] Calculation Examples

• Mike shares step-by-step examples of calculating the QBI deduction below and above income thresholds.
• What is the Impact of W-2 wages and qualified property on the deduction?

[20:21 - 23:03] Conclusion and Resources

• The QBI deduction is taken on personal tax returns.
• The expiration of the QBI deduction is after 2025 unless extended by Congress.

Direct Quotes:

"If you have sole proprietorship income, LLC income, S corporation income, partnership income, those are all the types of income that would qualify for the QBI deduction." - Mike Jesowshek, CPA

"The QBI deduction is taken on your tax return, not your business tax return."- Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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