The qualified business income (QBI) deduction is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. The QBI deduction was created by the 2017 Tax Cuts and Jobs Act.

Here are some key points to understand about the QBI deduction:

• Qualified Business Income: This is the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business that are reported on your personal tax return. Qualified business income is similar to net income but excludes several types of income, such as interest, dividends, and capital gains, as well as income from businesses located outside of the U.S. .

• Eligibility: The QBI deduction is available to non-corporate taxpayers who have "pass-through income". This includes sole proprietorships, partnerships, S corporations, and limited liability companies (LLCs) . However, not all pass-through businesses are eligible for the QBI deduction. The deduction depends on the type of business and the owners total taxable income for the year.

• Limitations: There are limitations to the QBI deduction. For example, if your taxable income is above a certain threshold, you may not be eligible for the full 20% deduction. Additionally, certain types of businesses, such as specified service trades or businesses (SSTBs), may have additional limitations or exclusions.

To determine whether you are eligible for the QBI deduction and how much you can deduct, you will need to calculate your qualified business income and follow the IRS guidelines for eligibility and limitations.