Qualified Business Income Deduction (for dummies!)

OBBBA ALERT: To be eligible for the Qualified Business Income Deduction, you must have Qualified business income of at least $1,000 starting in 2025. For those who do qualify, there is now a $400 minimum deduction.

Enacted by the 2017 Tax Cuts and Jobs Act, the Qualified Business Income Deduction (or QBID) was designed to give smaller business a tax break. Most of the resources and literature out there presents a very complicated picture of the deduction, and ignores the simple calculations that affect the vast majority of small business taxpayers. This video is an attempt to oversimplify a very complex topic.

2024 UPDATE:

2024 "Low Threshold": Ordinary Taxable Income of $383,900 for Married Filing Jointly/Qualified Surviving Spouse, $191,950 for all other statuses.

2024 "High Threshold": Ordinary Taxable Income of $483,900 for Married Filing Jointly/Qualified Surviving Spouse, $241,950 for all other statuses.

Additional resources:

IRS Publication 334: "Small Business Tax Guide": https://www.irs.gov/pub/irs-pdf/p533.pdf
(being revised as of video publication date)

IRS Form 8995 "Qualified Business Income Deduction": https://www.irs.gov/pub/irs-pdf/f8995...

For a glimpse into how complicated QBID computations can get, click here:    • Why are Taxes So Complicated? (100th video...  

For ALL the details regarding QBID, click here: https://www.nolo.com/legal-encycloped...

If you want to know all about self-employment in general, click here:    • Are you self-employed? (and don't know it?)  

If you want to know all about self-employment tax, click here:    • What is Self-Employment Tax (and why do I ...  

DISCLAIMER:

The information presented in this video is for informational and educational purposes only, and is not intended to render tax advice for specific situations. If you have questions about your specific tax situation, please consult the resources linked above or consult with a qualified tax professional in your community.

The information contained in this video is based on tax law and IRS regulations as of the date of publication, and may be subject to change.