When you have a business, you could qualify for Section 199A also know as the Qualified Business Income Deduction.
A few years back the tax code was adjusted so that corporations got a 20% tax break, so to make it fair to Businesses that are not Corporations, they set this up.
Self-Employed Taxpayers can get up to a 20% credit (tax -free income) for their business income (and sometimes rental income).
Most Taxpayers that file Schedule C qualify.
Farms that are for-profit qualify.
Rental income does not count unless you are running the rental as a business. You would have to be a Real estate Professional or spend a significant time dealing with the rental.
The tax law is pretty sloppy on this one as far as what businesses qualify, so rather than explain what qualifies, the easier thing to do is say what doesn't.
Most ALL self-employed taxpayers qualify EXCEPT
Specialized Service Trade Or Businesses.
According to the IRS:
“An SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading or dealing in certain assets, or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners. The principal asset of a trade or business is the reputation or skill of its employees or owners if the trade or business consists of the receipt of income from endorsing products or services, the use of an individual's image, likeness, voice, or other symbols associated with the individual's identity, or appearances at events or on radio, television, or other media formats.”
Not Actors
Not Doctors
Not Attorneys
Not Accountants
Not Athletes
If you are still uncertain if your business qualifies, you can tell us what that business is and we should be able to give you an answer.
If you qualify for the deduction, the TurboTax program computes it for you and enters it on your 1040 line 13.
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