Question

Describe what is meant by qualified business income for purposes of the deduction for qualified business income.

Answer 1

As per IRS, the qualified business income refers to the net amount of qualified items of gain, income, deduction, and loss from any qualified business or trade in U.S. The items included in taxable income will be only counted. QBI permits pass-through businesses, inclusive of the eligible owners of small businesses, to deduct up to 20% of their QBI operated as a sole proprietorship or through a S corporation, partnership, estate or trust. Pass-through businesses will pass the gains to their owners, and they will report it on the personal tax returns. The income would become subject to the tax rate of recipient’s instead of the generally lower corporate tax rate.