03/12/2024

QBI Deduction

Understanding how it could be gone tomorrow

The deduction for qualified business income (QBI) is currently accessible for eligible individuals until 2025. At that point, unless Congress enacts legislation to prolong it, it is set to expire. As 2024 progresses, it’s crucial to capitalize on this advantageous deduction before it potentially vanishes.

The QBI Basics

The QBI deduction can be up to 20 percent of:

• QBI earned from a sole proprietorship or a single-member limited liability company (LLC) that’s treated as a sole proprietorship for federal income tax purposes, plus
• QBI from a pass-through business entity, meaning an S corporation, a partnership or an LLC that is treated as a partnership for federal income tax purposes.

QBI can also include up to 20 percent of eligible income from publicly traded partnerships and up to 20 percent of eligible dividends from real estate investment trusts. However, this article focuses specifically on QBI deductions from the more common kinds of pass-through businesses.  Important to note: Pass-through business entities report their federal income tax items to their owners, who then take them into account on their owner-level returns. The QBI deduction, when allowed, is then written off at the owner level, and can potentially save significant tax dollars.

Please select this link to read the complete article from OSAP Strategic Partner Clark Schaefer Hackett.