QBI Deduction: Maximize It Before It’s Gone

As you may be aware, the qualified business income (QBI) deduction introduced by the Tax Cuts and Jobs Act provides a valuable tax-saving opportunity for business owners like yourself.

Unfortunately, the QBI benefit expires after 2025, so there is a limited window of time to maximize this deduction.

The QBI deduction can be as much as 20 percent of qualified business income for eligible business entities, including sole proprietors, partnerships, S corporations, and certain LLCs. However, there are limitations, particularly for high-income earners or those in specified service trades or businesses (where the tax code for high-income phases out the deduction completely).

To help you make the most of this deduction, I recommend considering the following strategies:

• Business aggregation. If you own multiple businesses, combining them for QBI purposes may increase your deduction.

• Carefully manage depreciation. Adjusting your approach to depreciation deductions can impact your taxable income and QBI.

• Review retirement contributions. Large deductible retirement plan contributions can reduce your QBI deduction.

• Filing separately. In certain cases, filing as “married filing separately” may result in a higher QBI deduction, but it requires careful evaluation.

Consider the above strategies to maximize the QBI deduction before it sunsets in 2025.