For tax years beginning in 2020, you can potentially claim a personal federal income tax deduction for up to 20% of qualified business income (QBI) from a so-called “pass-through” business, such as:
- A sole proprietorship,
- A limited liability company (LLC) treated as a sole proprietorship,
- A partnership,
- An LLC treated as a partnership for tax purposes, or
- An S corporation.
The QBI deduction is subject to restrictions that can apply at higher personal income levels. If you qualify, the deduction is claimed on your 2020 Form 1040, which is due on April 15 (or October 15 if you extend your return). Your tax professional can interpret the complicated QBI deduction rules and calculate your maximum allowable write-off.
