QBI Deduction for Small Business

[Michael16]

I'm a sole proprietor (consulting business) with 2022 being the first year of my small business. I'm in the process of completing my 2022 taxes. I've entered all personal (W-2 from my wife) and business (1099s) income as well as deductions. I'm married filing jointly with my taxable income falling below the MFJ threshold for the QBI deduction. TurboTax indicates I do not qualify for the QBI deduction, but I'm unable to determine why.

Any thoughts on what may be disqualifying me from the QBI deduction?

[ThomasM125 · Accepted solution]

You have to have qualifying business income (QBI) to receive a deduction in the current year. You start with your business income, but must reduce it by your self-employment tax deduction and self-employed retirement plan contributions. Also, your deduction can't be more than your taxable income less capital gains and qualified dividends times 20%.

You must also make sure you indicated in TurboTax that your business income is QBI qualifying. You will see a question regarding that after you enter your business income and deductions.

Also, if you had negative QBI in the previous year, you need to carry that forward to the current year to reduce this year's QBI. You may also have losses on publicly traded partnerships or REIT's that would reduce your QBI.