What is Qualified Business Income (QBI) Deduction?
Definition The qualified business income deduction, created by Section 199A, lets many owners of pass-through businesses deduct up to 20 percent of their qualified business income. Above certain income thresholds the deduction is limited by W-2 wages paid, the value of business property, and whether the business is a specified service trade. It reduces taxable income but not self-employment tax.
This deduction can significantly cut the tax bill for small-business and self-employed clients, but the income thresholds and limits make it a frequent planning opportunity for firms.