Tax
Qualified Business Income (QBI) Deduction
A federal deduction of up to 20% of qualified business income for owners of pass-through entities.
Definition
Created by the Tax Cuts and Jobs Act, the QBI deduction lets owners of sole proprietorships, partnerships, S-corps, and certain LLCs deduct up to 20% of their qualified business income. The deduction is subject to income limits, W-2 wage tests, and additional restrictions for specified service businesses such as accounting, law, and consulting.
When It Matters
Every year you file a personal return that includes pass-through business income.
Common Questions
Do CPAs and consultants qualify for the QBI deduction?
Specified service trades — including accounting, law, and consulting — phase out of the deduction above certain income thresholds. Planning matters most for owners whose income hovers near those thresholds.