Alright, let’s cut to it. The Qualified Business Income Deduction, aka the QBI deduction, is one of the best tax breaks out there for small business owners. If you qualify, you could deduct up to 20% of your business income from your taxes. That’s not small talk… that’s real money back in your pocket.
But most business owners either do not know about it… or think it’s too complicated to deal with.
Let’s fix that.
What is it?
The QBI deduction is a tax break for people who earn income through a pass-through business. That includes sole proprietors, LLCs, partnerships, and S corporations. If your business income “passes through” to your personal tax return, you are in the right ballpark.
Basically, if you made $100,000 in profit, you might only pay tax on $80,000. That’s a 20% deduction, just for running your business.
Who qualifies?
If your taxable income is below $191,950 (single) or $383,900 (married filing jointly) for 2024, you likely qualify without any added complexity. You get the full 20% deduction, no strings attached.
If you are above those income limits, it depends on your business type. Certain “specified service trades or businesses” (like law, accounting, financial services, or consulting) start to lose the deduction as income goes up. But if you are outside those industries, or structured the right way, you may still get some or all of the benefits.
And yes, how much you pay employees and what your business owns can also impact your eligibility once you are over the income threshold.
Why should you care?
Because it’s one of the few deductions that does not require you to spend more money to save on taxes. It’s straight-up tax savings for income you are already earning.
The QBI deduction was created to help small businesses stay competitive. But navigating it takes some strategy. That’s where most people get overwhelmed, and either miss out or leave money on the table.
Bottom line
This deduction is not just a nice-to-have… it should be a core part of your tax strategy as a small business owner. It’s one of the simplest ways to legally keep more of what you earn.
Not totally sure you are getting it, or getting the most from it? Let’s talk about how to make this work for you – your first session’s on us.
