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Qualified Business Income Deduction (for dummies!)

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Enacted by the 2017 Tax Cuts and Jobs Act, the Qualified Business Income Deduction (or QBID) was designed to give smaller business a tax break. Most of the resources and literature out there presents a very complicated picture of the deduction, and ignores the simple calculations that affect the vast majority of small business taxpayers. This video is an attempt to oversimplify a very complex topic.
2023 UPDATE:
2023 "Low Threshold": Ordinary Taxable Income of $364,200 for Married Filing Jointly, $182,100 for all other statuses.
2023 "High Threshold": Ordinary Taxable Income of $464,200 for Married Filing Jointly, $232,100 for all other statuses.
Additional resources:
IRS Publication 334: "Small Business Tax Guide": www.irs.gov/pu...
(being revised as of video publication date)
IRS Form 8995 "Qualified Business Income Deduction": www.irs.gov/pu...
For a glimpse into how complicated QBID computations can get, click here: • Why are Taxes So Compl...
For ALL the details regarding QBID, click here: www.nolo.com/l...
If you want to know all about self-employment in general, click here: • Are you self-employed?...
If you want to know all about self-employment tax, click here: • What is Self-Employmen...
The Tax Geek on The Site Formerly Known as Twitter: @taxgeekusa
The Tax Geek on Reddit: www.reddit.com/r/askataxgeek
Intro and background music: “Bluesy Vibes” - Doug Maxwell - RU-vid Audio Library
DISCLAIMER:
The information presented in this video is for informational and educational purposes only, and is not intended to render tax advice for specific situations. If you have questions about your specific tax situation, please consult the resources linked above or consult with a qualified tax professional in your community.
The information contained in this video is based on tax law and IRS regulations as of the date of publication, and may be subject to change.

Опубликовано:

26 авг 2024

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Комментарии : 31

@TheTaxGeek 2 года назад

2023 UPDATE: 2023 "Low Threshold": Ordinary Taxable Income of $364,200 for Married Filing Jointly, and $182,100 for all other statuses. 2023 "High Threshold": Ordinary Taxable Income of $464,200 for Married Filing Jointly, and $232,100 for all other statuses.

@dpgreene 5 месяцев назад

I find this form very clunky. It's odd what the IRS chooses to be worked out in the form vs off-form via instructions. Thank you for clarifying it!

@TheTaxGeek 5 месяцев назад

I don't give my opinion on the tax code very often, but IMO QBID is one of the most needlessly overcomplicated provisions in the tax code.

@corduroy77 2 года назад

Awesome vid, I couldn't understand business deductions FOR AGI vs FROM AGI before this, but I get it now. Def gonna help with my tax class. Thank you!

@TheTaxGeek 2 года назад

I'm so glad I could clear that up for you!

@truthseeker8766 3 года назад

Excellent, thank you!!!

@TheTaxGeek 3 года назад

Glad it was helpful!

@FlaschDJ 2 года назад

It is my understanding that Schedule C (Line 31) profit must be reduced by (1/2 Self-employment tax + Self-Employment Health insurance Deduction + IRA contributions) when tallying QBI.

@TheTaxGeek 2 года назад

Yes, that is covered in the video when "qualified business income" is defined.

@IRISFITZGERALD101 2 года назад

Thank you for simplifying this.

@TheTaxGeek 2 года назад

You're very welcome!

@BrainOptimizeMe 3 года назад

The form 8995 makes no mention of deducting the standard deduction in the calculation on lines 11 - 13.

@TheTaxGeek 3 года назад

It certainly doesn't. To get the figure on line 11, you take your Adjusted Gross Income and subtract either your standard deduction or your itemized deductions, if. you are taking them. Subtract your net capital gains (line 7 of Form 1040) to arrive at your ordinary taxable income for QBID purposes. This is precisely why we use computers to prepare taxes these days.

@graceharney7352 3 года назад

excellent quality video and engaging, thank you so much! subbed

@TheTaxGeek 3 года назад

Thanks and welcome

@iluvbastard 2 года назад

Thank you so much for the information! You are a lifesaver

@TheTaxGeek 2 года назад

You are so welcome!

@jimmbbo 2 года назад

Very helpful video. Subscribed!

@TheTaxGeek 2 года назад

Thanks! I'm glad you found it helpful!

@amaliamayadiaz1380 2 года назад

how would the ordinary taxable income be calculated for those "married filing jointly"?

@TheTaxGeek 2 года назад

It's based on both spouse's incomes, even if only one had qualified business income.

@tomtran8849 Год назад

Would you please help me to figure estimated tax payments for 1099 workers and /or W-2 ? Thank you.

@seekinghimdaily92 Год назад

I honestly would recommend using QBO or Quickbooks Self-employed for that. They give a discounted first 3 months for the subscription.

@lieslceleste3395 2 года назад

Can you help me out? I took another job but the job I left was so desperate that they paid me as a contractor. The work was essentially what I used to do for them. I received a 1099 Nec from them. Do I qualify for the QBI deduction? TT says no because I did the same work as a contractor as I did when I was a full time employee.

@TheTaxGeek 2 года назад

Yes, absolutely you can take a QBI deduction. If you are paid on a 1099 NEC, you are considered to be in business for yourself and the IRS expects the income to be reported on a Schedule C. Schedule C income is Qualified Business Income. I'm sorry that your employer chose to skirt payroll taxes and wage and hour laws by paying you as a contractor when you were, for all intents and purposes, an employee. But that doesn't mean you aren't entitled to a QBI deduction just like any other person in business for themselves.

@lieslceleste3395 2 года назад

@@TheTaxGeek Thanks. That’s not what happened though. They are relocating so I took another job. They then became desperate and offered me to work part time as a contractor until they presumably get someone else to take over. Turbo Tax asks if it’s essentially the same job. (I’m guessing the govt doesn’t want an end run around just for the company to avoid taxes) It’s only the same job in the sense that I’m doing a small portion of what I used to do for them. I have a full time job with another company. I was worried that the IRS would disallow the QBI deduction.

@TheTaxGeek 2 года назад

I believe that TT asks you that question is to see if you want to file Form SS-8, to reclassify your work as an independent contractor as an employee. Don't do that, it stirs up a huge hornets nest for both you and your (former) employer. Go ahead and file your NEC on a Schedule C. You'll pay some self-employment tax, but get the QBID. The IRS will not question it.

@lieslceleste3395 2 года назад

@@TheTaxGeek Thanks. It really isn’t the same job anyway since I’m only doing a very small portion of the original job. I have a full time job at the new place. I just thought I’d help them out and make a little extra money. Thanks again for your help.