10 Things You Should Know About the 20% QBI Deduction Story

10 Things You Should Know About the 20% QBI Deduction

This fairly new deduction was passed as part of the Tax Cuts and Jobs Act in 2017 as an attempt to give small business owners a break comparable to the substantial corporate tax cuts on C Corporations in the same legislation.

[{"selector":"#anim-c6d649a8-9a30-4ad8-843d-87218d42f72a","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-4d00aaa1-fc7d-434f-8460-09c8ea39f3f5","keyframes":{"transform":["translate3d(-125.09091%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Read More

This complicated section of tax code can be a real boon to many businesses, but it’s not easy to understand.

[{"selector":"#anim-c56e17b7-e5f4-4b72-b395-424917b6c520","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-fa267f69-dce1-4760-849b-c9ff2187187f","keyframes":{"transform":["translate3d(-125.09091%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Read More

Today, I’d like to share 10 tidbits that can help you determine if you might benefit and how to optimize your potential deduction.

[{"selector":"#anim-157181b0-4822-4202-b8c2-e8e522766296","keyframes":{"opacity":[0,1]},"delay":0,"duration":2400,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-591314ab-6c08-41d9-ae30-24a8afc170c8","keyframes":{"transform":["translate3d(0px, -99.4978%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":2400,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Read More

10 Things You Should Know About the 20% QBI Deduction

If essentially all of your household income comes from employment as a W-2 employee, there’s almost nothing in Section 199A for you.

[{"selector":"#anim-cc0d094e-221f-44e9-97f0-e673132d6b54","keyframes":{"transform":["translate3d(105.23416%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-78170108-0db1-45c1-9ce1-edddced530fa","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-749d5717-c136-4fe1-9dc5-65c0d35fc3f5","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] Read More

You might be an owner in several small businesses. If that’s the case, the deductions from each business can be added to one another to reach your total potential QBI deduction.

[{"selector":"#anim-f22bcddf-6674-4ca1-90e2-5f0ffea6dce9","keyframes":{"transform":["translate3d(105.23416%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-e017be2d-4240-47b0-88d8-8433f7daf343","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-608d9e81-fdb0-40a9-bdce-ff181207aba8","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] Read More

For example, I own Physician on FIRE LLC, and as a pass-through entity, the income qualifies for a 20% deduction on qualified business income.

[{"selector":"#anim-8c0c1545-3ff2-4a6b-a949-83b1c6ef25c6","keyframes":{"transform":["translate3d(105.23416%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-9bf4f59c-b546-41e7-be6a-063e53b8af18","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-ceb12819-8aaa-49eb-a1a6-89dfa3ae0a0d","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] Read More

It’s not very tax-efficient to own Real Estate Investment Trust (REIT) funds or individual REITs in a taxable brokerage account. However, Section 199a makes it less disadvantageous to do so.

[{"selector":"#anim-f41574d2-b605-4813-b641-94fb24d820aa","keyframes":{"transform":["translate3d(105.23416%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d183ea85-8dc8-4f9b-9af1-c8f2eed16d40","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-b6b0419a-eb36-4330-9198-844569750f87","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] Read More

4. Your taxable income can limit your deduction.

[{"selector":"#anim-4634a505-c48b-4c32-805b-7075499ae16d","keyframes":{"transform":["translate3d(105.23416%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a1612bc9-8a32-44ff-b5ca-93a18e6b2a34","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2332f48c-77af-4a60-a2fa-cdcb2238aa4f","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] Your final QBI deduction is the lesser of several calculations, and one of those calculations is your taxable income. As someone who donates generously, this fact has definitely impacted my deduction. Read More

SWIPE UP NOW TO READ MORE

[{"selector":"#anim-68a4798b-bf6f-4a3b-a969-f5bddb886593","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-1ee92956-f17f-4ca5-b15a-a04a60103109","keyframes":{"transform":["translate3d(-116.50794%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Read More

10 Things You Should Know About the 20% QBI Deduction

This fairly new deduction was passed as part of the Tax Cuts and Jobs Act in 2017 as an attempt to give small business owners a break comparable to the substantial corporate tax cuts on C Corporations in the same legislation.

This complicated section of tax code can be a real boon to many businesses, but it’s not easy to understand.

Today, I’d like to share 10 tidbits that can help you determine if you might benefit and how to optimize your potential deduction.

10 Things You Should Know About the 20% QBI Deduction

If essentially all of your household income comes from employment as a W-2 employee, there’s almost nothing in Section 199A for you.

1. W-2 income is ineligible.

You might be an owner in several small businesses. If that’s the case, the deductions from each business can be added to one another to reach your total potential QBI deduction.

2. You can add up different sources of QBI.

For example, I own Physician on FIRE LLC, and as a pass-through entity, the income qualifies for a 20% deduction on qualified business income.

It’s not very tax-efficient to own Real Estate Investment Trust (REIT) funds or individual REITs in a taxable brokerage account. However, Section 199a makes it less disadvantageous to do so.

3. REIT income counts

4. Your taxable income can limit your deduction.

SWIPE UP NOW TO READ MORE

MORE STORIES