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.
RELATED SERVICES
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RELATED TERMS
S Corporation
TAX
A tax election that lets a corporation or LLC pass income through to its owners' personal tax returns, avoiding double taxation.
Pass-Through Entity
TAX
A business whose income passes through to its owners and is taxed on their personal returns rather than at the entity level.
Estimated Tax Payments
TAX
Quarterly payments business owners and self-employed individuals make toward their annual tax bill.