Accavallo & Company, LLC

Maximizing Your QBI Deduction: Seize the Opportunity Before It Expires

At Accavallo & Company, we understand the importance of leveraging every available tax-saving opportunity. The Qualified Business Income (QBI) deduction presents a significant chance for eligible businesses to reduce their tax liability. However, this deduction is scheduled to sunset after 2025. Hence, if you qualify, it’s crucial to capitalize on this benefit while it’s still accessible.

Understanding the Basics of the QBI Deduction

The QBI deduction operates at the owner level and can amount to up to 20% of qualified income. This encompasses earnings from sole proprietorships, single-member LLCs treated as sole proprietorships for tax purposes, and pass-through entities like partnerships, LLCs treated as partnerships, or S corporations.

Qualified income includes gains from eligible businesses, adjusted for related deductions such as contributions to self-employed retirement plans, self-employment tax deductions, and self-employed health insurance premiums.

Navigating Limitations and Thresholds

For higher income earners, limitations on the QBI deduction come into effect. In 2024, these limitations initiate when taxable income surpasses $191,950 ($383,900 for married joint filers) and fully phase in beyond $241,950 or $483,900 respectively.

If your income exceeds the fully-phased-in threshold, your QBI deduction is capped at the greater of your share of W-2 wages or a combination of W-2 wages and the unadjusted basis of qualified property.

Special Considerations for Specific Businesses

For specified service trade or businesses (SSTBs), phaseout begins at the same threshold, and if your taxable income exceeds the phaseout amount, you’re ineligible for the QBI deduction based on SSTB income.

Additionally, other rules apply, including the option to aggregate multiple businesses for deduction purposes, potentially allowing for a larger deduction than if businesses were considered separately.

Navigating Complexities and Maximizing Benefits

While the QBI deduction presents a valuable tax-saving opportunity, navigating its complexities requires careful planning. Factors such as claiming or forgoing certain deductions, like Section 179 depreciation or bonus depreciation, can impact your QBI deduction and overall tax outcome.

The clock is ticking on the QBI deduction, with its expiration slated for 2025. While there’s a possibility of extension, relying on such prospects isn’t prudent. Therefore, maximizing the deduction for 2024 and 2025 should be a priority.

At Accavallo & Company, we specialize in optimizing tax strategies to maximize benefits for our clients. Let us help you seize the full potential of the QBI deduction before it’s too late. Contact us today to schedule a consultation.

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Sherri Fisher is a Tax Manager at Accavallo & Company, LLC.  Sherri has longstanding expertise in Trust and Estate Taxation, Eldercare, and Estate planning. Sherri appreciates the relationships she has built with estate planning attorneys and advisors, to provide a team approach to assisting her clients. Sherri also has seasoned experience in business and individual taxation and is partial to assisting start-ups in developing overall accounting and operating plans.

Prior to joining Accavallo & Company, LLC, Sherri was a manager in a large firm, servicing high net worth trust clients, business, and personal clients. She was also a Partner in a large bookkeeping firm, which specialized in cloud accounting systems for regional and national companies. Sherri led a team in assisting clients to organize their accounting systems.  She is a graduate of Florida Atlantic University with a B.S. degree in Accounting.    

Sherri’s experience includes working with companies and organizations in a variety of industries including:

  • Investment Trusts

  • DAPT and Family Investment Partnerships

  • Estate and Probate Administration

  • E-Commerce

  • Manufacturing

  • Construction

  • Real Estate Investment

  • Marketing and Service-based industries

In addition to her professional accomplishments, Sherri is an Intuit Advanced Pro Advisor, Intuit Future Firm Advisory Board member, member of the Valley WIN Network, and proudly served as past Connecticut Public School liaison for the Yale Tommy Fund for Childhood Cancer. Sherri enjoys time with her family, Cleveland sports, thrifting and gardening.