Do you have income from a sole proprietorship, partnership, LLC, or S corporation? If so, you may be eligible for a new deduction called the Qualified Business Income (QBI) deduction. This deduction is not itemized, so taxpayers who take the standard deduction can take advantage of this benefit.
Generally, the deduction is 20% of your qualified business income, or 20% of taxable income (without capital gains). The deduction can be limited for higher income individuals or individuals in a Specified Service Trade or Business (SSTB), such as health, legal, and financial services, or any trade or business where the principal asset is the reputation or skill of one or more of its employees. The limitation only applies if a taxpayer’s taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers. The deduction is phased out for joint filers with taxable income of $207,500 or more and for all other taxpayers with taxable income of $415,000 or more.
So, what does this mean to you? If you have a pass-through business, come see me about whether you need to adjust your estimated taxes to put more money in your pocket throughout the year.