Qualified Business Income (QBI) Deduction Calculaotr

Use our free Qualified Business Income Deduction calculator to determine how much you may be able to write off your taxes as a self-employed business owner, solopreneur, or freelancer.

What is QBI?

Qualified Business Income (QBI) refers to the net amount of income, gains, deductions, and losses from any qualified trade or business in the United States. This income is eligible for the QBI deduction, which was introduced under the Tax Cuts and Jobs Act of 2017. The deduction allows eligible self-employed individuals, sole proprietors, and pass-through entities, such as S corporations and partnerships, to deduct up to 20% of their QBI from their taxable income.

This deduction aims to reduce the tax burden on small business owners and promote economic growth by incentivizing entrepreneurship and investment in small businesses. It's important to note that QBI does not include employee wages, capital gains, interest income, and certain other types of earnings.

How to use the Calculator

To accurately calculate your Qualified Business Income (QBI) deduction using the calculator, you'll need to input the following information:
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‍Total Income: Enter your total taxable income for the year. This should include all sources of income, such as wages, dividends, interest, and earnings from your business or businesses.
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‍Business Income: Input the total income specifically from your qualified trade or business before any deductions. This is the gross income you've earned through your business activities, excluding any non-business income.
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‍Other Deductions: This line should include all deductions other than the QBI deduction that affect your total taxable income. Examples include:

• Standard or Itemized Deductions: Such as mortgage interest, state and local taxes, charitable contributions, and medical expenses.
• Business Expenses: These are the ordinary and necessary expenses incurred in the operation of your business, excluding those accounted for in calculating your business income.
• Self-Employment Tax Deduction: Half of the self-employment taxes paid can be deducted here.
• Retirement Contributions: Contributions to SEP-IRAs, SIMPLE IRAs, and solo 401(k) plans, for instance.
• Health Insurance Deductions: If you are self-employed, you may be able to deduct premiums you pay for medical, dental, and some other types of insurance covering yourself, your spouse, and dependents.

Remember, the QBI deduction calculation can be complex, depending on various factors including the type of business, total income levels, and whether your business falls into a specified service trade or business (SSTB), which might have limitations if your income exceeds certain thresholds. Always consider consulting with a tax professional to ensure accuracy and compliance with IRS rules.