The qualified business income deduction (QBI) is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes.
In general, total taxable income in 2021 must be under $164,900 for single filers or $329,800 for joint filers to qualify. In 2022, the limits rise to $170,050 for single filers and $340,100 for joint filers.
Entities eligible for the qualified business income deduction include:
⦁ Sole proprietorship
⦁ S corporations.
⦁ Limited liability companies (LLCs).
If you’re over the income limit
If you’re over the income limit, there are a few tests that determine whether you qualify for the qualified business income deduction. One such test is this: Is your business a “specified service trade or business”?