It depends. If your personal taxable income is under the threshold of $157,500 for single or $315,000 for joint, then the calculation will be for 20% of EITHER the qualified business income (see definition below) less any self-employed taxes, health or retirement expenses OR 20% of your taxable income (except capital gains and dividends) whichever is LESS. For income above the threshold ranges, the calculation is different and can be found in the FAQ below.
For the purposes of the deduction, QBI is defined as net business income, excluding:
- Income generated outside the United States
- Investment income
- W-2 compensation paid to an S corporation owner
- Guaranteed payments to a partner
- Income from REITs, publicly traded partnerships, and qualified cooperatives (these entities may qualify for a 20% deduction under a different set of rules, the explanation of which is beyond the scope of this FAQ).
The above definition, plus more information can be found in the QBI FAQ below:
A QBI deduction worksheet will be included with your tax return. To preview your 1040 form before filing, follow these steps below:
