We at B&J Bookkeeping and Taxes help all of our clients make the most of their profits by minimizing their tax burden. One of the ways we do so is by staying on top of new developments in business taxes. Our clients in particular are concerned about one business tax break that expires in 2025. We will tell you all you need to know below.<!—more—>
The 2017 Tax Cuts and Jobs Act
This tax law was enacted a few years ago in an effort to boost businesses. Here are a few must know data points:
- The Act made reforms to individual and corporate tax rates.
- It lower marginal tax rates and capital cost of capital in an effort to create more jobs, higher wages, and an ultimately higher GDP.
- The standard deduction for individuals and married couples increased from $6,350 to $12,200 and $12,700 to $24,400, respectively.
- It also made changes to the qualified business income deduction.
Did you know?Did you know? The Tax Cuts and Jobs Act led to a 2.7% raise in wages, 890,000 jobs, and a 3.5% increase in GDP? Source: The Tax Foundation
What is the Qualified Business Income Deduction?
The QBI is a tax deduction that allows eligible small-business owners and the self-employed to deduct up to 20% of their qualified business income. This tax deduction is for those who report business income on their personal tax return. It is often done for those of you who own and operate an LLC, partnership, sole proprietorships, and corporations. It includes most forms of profit with the exception of capital gains or losses, income from interest, dividends, and any income gained outside of the United States.
Read more about the Qualified Business Income Deduction on the official IRS Site.
Why Do I Need to Know About the Qualified Business Income Deduction?
Unfortunately, the OBI deduction is set to expire in 2025, and will affect millions of people. Congress will have to act soon in order to extend this deduction. Plans have been made to keep it for those making $400,000 or less, but nothing has been passed as of yet. Finally, those of you who haven’t been taking advantage of this deduction are advised to do so immediately. We also advise looking into this when filing your 2024 business tax return.
Approximately, 25.9 million business owners filed for this claim on their taxes in 2021, which was up from 18.7 million in 2018? Source: CNBC
More Business Tax Breaks
Not sure if the Qualified Business Income Deduction can be beneficial for your Houston-based business? Contact our office or call us at 281-894-6494 to learn more about this and many other tax deduction opportunities.
