CHAPTER 21Qualified Business Income Deduction
When the Tax Cut and Jobs Act lowered the corporate tax rate to 21%, there was an attempt by Congress to reduce the tax rate for owners of pass‐through entities in an indirect way. Instead of providing a special tax rate that these owners could apply to their business income, Congress instead created a special deduction that in effect lowers the tax rate (e.g., the top rate of 37% becomes an effective tax rate of 29.6% on profits when the qualified business income deduction is applied), but only for some pass‐through owners. The special deduction is called the “qualified business income (QBI) deduction.” This deduction does not require any special outlay or action; you claim it if you are eligible. The Joint Committee on Taxation projected that for 2022 approximately 22.4 million taxpayers would claim the QBI, representing approximately $188 billion in tax deductions.
General Rules
The deduction may be claimed by ...
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