QBI Tax Deduction: Take Action Now or You Could Miss It
QBI tax deduction? That means qualified business income. If you don’t take advantage of this deduction, the IRS will. In case QBI tax deduction sounds like a bunch of unfamiliar jargon, let’s just turn it into “plain English” and talk about it. But first, let me introduce myself.
Kabee Sulivan here: tax aficionado, CPA-in-the-making, pop culture enthusiast, and thriving millennial. I believe confusing tax law lingo shouldn’t stray you away from getting any benefits you are eligible for. My goal is to help you achieve a future of deliberate results by knowing the real-time steps to take action now.
What’s all the buzz about?
Taking a look around town, there’s always a buzz about something new; glimmers of new business start-ups, shops, doctors, lawyers, coffee houses popping up at each square corner. Who’s behind this drive? A majority of new business owners are a part of the labeled fast, “I-want-it-now” generation. Myself, included. We are go-getters, taking action to turn dreams into realities. My dream for businesses is to help them thrive to their maximum potential. To do that, business owners need to know what they can do right now to reach that peak. And as the saying goes, success does not happen overnight. And wow, do I have a hot topic that will you’ll not only want but need to get a jump on right now.
Let’s look at QBI tax deductions from your angle.
Business owners, we’ve all heard about a new tax update passed in late December 2017, but does it affect all business owners and by how much? The short answer: YES and BIG TIME. The American Institute of CPAs is calling these updates monumental and for good reason. Not knowing and taking the right steps now could have you missing out entirely. You might want to take a seat for this one, its nail-biting levels of intriguing.
Twenty percent.
The key percentage to keep in mind. The new tax act is providing a deduction that is equal to 20% of qualified business income (QBI) for most sole proprietors and pass-through entities. Yes, this deduction covers Schedule C filers as well! But what exactly is QBI? In simple terms, it’s the ordinary income of the business –so, income from things like interest or dividends are excluded –less applicable expenses. Now, before your eyes start seeing dollar signs, there are limitations.
More about QBI tax deduction limitations.
Of course things this good will be hard to come by. One big limitation to keep in mind is the wage limit. The QBI tax deduction is limited to the lesser of 20% of QBI or the wage limit. The wage limit is the greater of 50% of the W-2 wages from the business or 25% of the W-2 wages from the business plus 2.5% of the unadjusted basis of the business’s qualified property. That’s a lot of percentages to keep up with and that’s just the limit on wages! Other limitations include special rules to specified service businesses, thresholds based on filing status, and those listed under Section 199A(c)(4).
As you research the QBI tax deduction, it’s easy to find that one question tends to lead to another. There’s a plethora of components to consider to make sure you do not miss out on this deduction. Take a breath and know we are here to continue offering what we do best: provide proactive tax planning so that you are taking real-time steps for a future of no surprises. Contact us to be sure you are on the right track in getting the most out of this tax update.
What’s the bottom line?
If you’ve never consulted a CPA tax, financial and business management specialist or considered setting a course based on strategic tax planning, now is the time to do it. Tax laws and opportunities have changed dramatically and will continue to do so. Stay prepared, flexible and in control.
Our goal is to become part of your overall life and business goal planning team so that you’ll be able to establish your own goals and know that you have a trusted professional on your team. We establish and maintain a personal and business relationship with our clients. Your LIFE is your business and your BUSINESS is your life. We’re here for YOU.
Call us at 479-668-0082 or email us.
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