The recent federal tax reform measures included a new deduction offering possibly the greatest tax benefit to pass-through businesses in more than 60 years.
The Qualified Business Income Deduction – or QBI – allows qualified small business owners to simply not pay income taxes on 20% of their income in tax years 2018 through 2026.
Like many provisions in the federal tax code, there are of course stipulations. Restrictions kick in to reduce the benefit when a taxpayer’s income rises and there are a different set of qualifications for Specified Service Trades or Businesses (SSTB).
Late this summer, the IRS released new proposed regulations intended to clear up some of the QBI deduction rules. These regulations provided guidance how owners of multiple businesses can use aggregation to affect their deduction and the definition of SSTBs, which face deduction limitations.