What if I told you that some business owners only pay taxes on 80% of their profits? Thanks to the Qualified Business Income (QBI) deduction, this is happening for thousands of business owners.
Who Qualifies:
You likely qualify if you have income from:
•A sole proprietorship
•An S-corporation
•A Partnership
Simple Example:
Let’s say you own an S-Corp that has $100K in business profit. With the QBI deduction, you could potentially exclude $20K from taxation. At a 24% tax rate, that’s $4,800 staying in YOUR pocket instead of going to the IRS!
The Catch (there’s always a catch):
There are actually a lot of rules & limitations around calculating & taking the QBI deduction. So make sure you’re working with a tax pro to help you maximize your QBI deduction.
Strategic Questions:
1. Is my current entity structure allowing me to maximize my QBI deduction?
2. Is my overall income too high to allow me to maximize QBI?
3. Should I adjust W-2 wages for myself or my employees to maximize QBI?
4. If I have rental properties, do I qualify for QBI?
While the rules around QBI are complex, the savings can be substantial, so make sure you’re taking advantage of this essential tax strategy.
In this series we’ve explored how retirement contributions, PTET, entity selection, and QBI are 4 of the most fundamental, and easiest, tax strategies to implement. Master these basics, and you’ll have a solid foundation for keeping more of what you earn while building long-term wealth.