Do You Qualify for the 20% Business Income Deduction?
December 24, 2019
Ask your accountant if the 20% qualified business income deduction, which took effect in 2018, applies to you. The tax provision allows “pass-through” entities such as S-corporations and LLCs to deduct up to 20% of their qualified business income.
Business owners in any industry are able to use the tax break, but to qualify, you must have 2019 taxable income that is below $160,700 if you’re single or $321,400 if you’re married and filing jointly. Professionals get a reduced deduction if their taxable income exceeds those amounts but is still under $210,700 (single) and $421,400 (jointly).
The tax break was part of the Tax Cuts and Jobs Act. The IRS issued guidance this year after there was confusion on who qualifies. The tax deduction expires at the end of 2025.
Also, the IRS issued guidance this year on the deduction rental property owners can take, including outlining special record-keeping that must be done to take advantage of this separate deduction. Read more about these tax deductions at CNBC.
“If You’re a Business Owner, Grab This 20% Tax Break Before the Year Ends,” CNBC (Dec. 21, 2019)
Updated: August 13, 2020