Am I Eligible For A Qualified Business Income (QBI) Deduction?

I can provide general guidance on the factors and rules that may affect your eligibility.

First, it is important to understand that the QBI deduction is available to individuals, trusts, and estates who own a qualified business, which can be a sole proprietorship, partnership, S corporation, or limited liability company (LLC). C corporations are not eligible for the QBI deduction.

Second, the QBI deduction is generally available for income earned from a qualified trade or business. The income must be effectively connected with the conduct of a trade or business within the United States, and it cannot be investment income or certain types of compensation income.

Third, there are annual limits and phaseouts for the QBI deduction, which depend on your taxable income and the type of business you own. For example, if you own a specified service trade or business (SSTB), such as a law or accounting firm, your QBI deduction may be reduced or eliminated if your taxable income exceeds certain thresholds.

Fourth, if you own multiple businesses, you must calculate your QBI deduction separately for each business and then combine them for tax purposes.

Finally, there are de minimis rules that may apply if your total QBI is less than a certain threshold. These rules can simplify the calculation of your QBI deduction.

Overall, determining your eligibility for a QBI deduction can be complex and may require consultation with a tax professional.

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Robert J. Pyle, CFP®, CFA, AEP® founded Diversified Asset Management, Inc., in 1996 to provide personalized, comprehensive wealth management services to successful individuals, families, single women, and business owners. His specialty is addressing the complex financial needs of self-employed professionals, corporate executives, and small-business owners. Our disclosure can be found here. The views, opinion, information, and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting, or tax advice.