Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
This deduction applies to sole proprietors, those who have an interest in a partnership, LLC, or S corporation. QBI is the net amount of items of income, gain, deduction, or loss from any qualified business trade or business. It does not include any capital gain (including Section 1231 gain) or loss, dividends, or interest income (other than interest properly allocated to your business).
In addition, QBI does not include any net operating loss (NOL) carryovers, other than those attributable to excess business losses of noncorporate taxpayers, who compute a net operating loss deduction on Schedule A of Form 1045.
You must reduce QBI by the following deductions claimed as adjustments to income on Schedule 1 (Form 1040 or 1040-SR):
Keep in mind, the deduction up to 20% of qualified business income is a personal deduction and not a business deduction. The deduction is subtracted from adjusted gross income (AGI) on Form 1040 or 1040-SR. It is not subtracted from business income or as an adjustment to gross income.
In other words, it can be claimed if you claim the standard deduction and don't itemize your personal deductions. The taxable income amounts used to calculate the QBID for 2024 have been adjusted for inflation.
If your taxable income in 2024 does not exceed $364,200 for married filing a joint return and $182,100 for all other returns, the deduction is 20% of combined qualified REIT dividends and qualified publicly traded partnership (PTP) income.
A specified service trade or business refers to businesses that provide personal services and are subject to stricter rules under the Qualified Business Income Deduction. The principal asset of these businesses includes the reputation or skill of one or more of its employees or owners.
For example, doctors, attorneys, accountants, consultants, financial advisors, brokerage, actuaries, and performing artists, as well as other businesses where the reputation or skill of the employees is the principal asset of the business, cannot claim any deduction once the 2024 taxable income reaches $464,200 for married filing joint returns, and $232,100 for other filers.
If you're in as specified trade or business and your taxable income exceeds the threshold for your filing status, the amount of qualified business income that can be taken into account for purposes of figuring the limitation on the deduction phases out over the first $100,000 of taxable income above the threshold for joint filers, or over the first $50,000 exceeding the threshold for others.
Engineering and architectural services are not classified as SSTBs, which means they are eligible for the QBID without SSTB limitations.
For qualifying property placed in service in 2024, first-year expensing is allowed up to a limit of $1,220,000. The limit begins to phase out if the total cost of qualifying property exceeds $3,050,000.
If the cost of qualifying property placed in service in 2024 exceeds $3,050,000, reduce the $1,220,000 expensing limit dollar-for-dollar for each dollar the cost of qualifying property exceeds $3,050,000 (but not below zero).
Example:, You place machinery in service during 2024 costing $3,110,000, the $1,220,000 deduction limit is reduced by $60,000 ($3,110,000 - $3,050,000) to $1,160,000 which is entered on Form 4562 in Part 1, line 5 (Dollar limitation for tax year).
If the cost of the property was $4,270,000 or more, no first-year expensing deduction would be allowed for 2024 because it would be completely phased out ($4,270,000 - 3,050,000) = $1,220,000 expensing limit.
Bonus depreciation is an additional first-year depreciation allowance equal to a set percentage of the adjusted basis of eligible property. The percentage for bonus depreciation for 2024 is 60% (a 20% decline from 2023).
Bonus depreciation is fully deductible for alternative minimum tax purposes; no adjustment is required. Bonus depreciation is also referred to as a "Section 168(k) allowance" and a "special depreciation allowance".
Bonus depreciation can be claimed for any property with a recovery period of 20 years or less, computer software that is not a Section 197 intangible, and buildings that replace or rehabilitate property damaged, destroyed, or condemned as a result of a federally declared disaster. Eligible property also includes the costs of television, film, and theatrical production and the cost of certain plants that are planted and grafted.
Keep in mind, if you fail to make an election not to claim bonus depreciation, then you are deemed to have claimed it even if you did not and must reduce the basis of the property by the amount of bonus depreciation that could have been claimed.
You may elect out of the additional first-year depreciation (bonus depreciation) by attaching a statement to your return specifying the asset class which you do not want to claim bonus depreciation. For example, you can elect out of bonus depreciation for all five-year property while claiming it for seven-year property.
Report bonus depreciation in Form 4562, Part II labeled "Special Depreciation Allowance", unless the property is listed property. For listed property, use Part V of Form 4562.
For 2024 the maximum credit amount is $4,213 for one qualifying child, $6,960 for two qualifying children, $7,830 for three or more qualifying children, and $632 for taxpayers who have no qualifying child.
The phaseout ranges for the credit have been adjusted for inflation. The excessive investment income limit is $11,600. This means, if taxpayer's qualified investment income from interest, dividends, capital gains and rental property exceeds $11,600 they may become ineligible to claim the EIC.
For 2024, the maximum child tax credit for a child under age 17 is $2,000. The credit begins to phase out when modified adjustment gross income ((MAGI) exceeds $400,000 on a joint return or $200,000 for all other filers.
There is an additional child tax credit that can be claimed if the child tax credit otherwise allowed is limited by tax liability; the refundable amount may not exceed $1,600 per qualifying child. The credit for other dependents is unchanged; it is not refundable and limited to $500 per dependent).