Maximizing the Qualified Business Income deduction (QBI) is a crucial small business strategy for any entrepreneur. For those who need to learn, this tax deduction is available to sole proprietors, LLCs, and other pass- through entities. It allows you to deduct up to 20% of your qualified business income, saving you a lot of money in taxes.
Fortunately, there are several simple strategies that small business owners can use to maximize their QBI deduction and make sure they are taking advantage of every penny available to them.
The first step is to ensure your income qualifies for the deduction. Generally, you must have earned your income through a sole proprietorship, LLC, partnership, or S corporation. That income is also eligible for the deduction if you have an employee.
Once you’ve verified your eligible income, it’s time to start planning for deductions. For instance, taking advantage of deductions such as business travel and business meals can help to lower your taxable income. Additionally, you can claim deductions on assets such as vehicles, equipment, and furnishings used in the business.
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