CHAPTER 10 Claiming Your Tax Bonus
You've already seen that when you expend money, you can then deduct your outlay in whole or in part. It costs you cash to advertise, but then you deduct what you spent. But just being in business as a Schedule C filer may also entitle you to a special deduction called the Qualified Business Income (QBI) deduction. It doesn't require you to spend any money to get it.
This is a personal deduction, not a business deduction, even though it's based on your business income. It doesn't reduce your income on Schedule C. It doesn't reduce your net earnings from self-employment for purposes of self-employment tax (explained in Chapter 11). It doesn't even reduce your gross income like deductions for IRA contributions and the write-off for your self-employed health insurance premiums.
The QBI deduction isn't straightforward. Depending on your taxable income and the business you're in, it can get downright complicated. Here are some key points to note.
General Rules
The QBI deduction is essentially 20% of your eligible business income. This is your net earnings from self-employment (business income minus deductible business expenses) excluding certain items (e.g., interest expense not properly allocable to a trade or business).
Table 10.1 2019 Taxable Income Threshold for QBI Deduction
| Filing Status | Taxable Income Threshold |
| Single and head of household | $160,700 ... |
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