The QBI deduction is a new opportunity to decrease your taxable income by 20%. It can help you reduce the amount of taxes you owe to the IRS or increase your refund amount. If you already filed your 2018 tax return and didn’t claim the QBI deduction, you should file an amended return.
How do I know if qualify for the QBI deduction?
Basically, if you have any qualified business income from a pass-through entity, you can claim the QBI deduction.
Then, your ability to claim this deduction depends on your taxable income, your filing status, your business’ entity, and your business’ industry. It’s a pretty complex deduction with limitations.
I qualify for the QBI deduction, but I didn’t claim it on my 2018 tax return. What should I do now?
File an amended return with the IRS. If you realize you were eligible to claim the deduction on your 2018 tax return, but didn’t, you can file Form 1040X.
If you file an amended return, you also have the option to aggregate businesses. You may want to take advantage of this opportunity now because you can’t aggregate businesses on amended returns in the future.
Starting in 2019, you can only aggregate businesses on your initial return.
There are a number of factors that may have prevented taxpayers from claiming this deduction.
First, it’s a new deduction. It was created when the Tax Cuts and Jobs Act passed in December 2017.
Second, because it’s new, the IRS had to issue regulations and related documents for this deduction. The IRS’ progress was slowed during the government shutdown.
The IRS did manage to release final regulations close to the start of tax season, but this didn’t give tax preparers or taxpayers much time to review or process the regulations. In addition, some critical pieces – like a tax form – weren’t ready at the start of the 2018 filing season.
However, the IRS estimates that nearly 23.7 million taxpayers are eligible to claim this deduction on their 2018 tax return. And the Joint Committee on Taxation estimates this deduction can reduce $27.7 billion in taxes in 2018 and $47.1 billion in 2019.
This could be an opportunity to reduce your tax bill. An opportunity you don’t want to miss. We highly recommend you ask your accountant to review and amend your tax return if you think you qualify for the QBI deduction.
What if I filed an extension?
If you filed an extension for your 2018 tax return, you have more time to figure out if you can claim this deduction. Make sure you get it right! Work with an accountant to review your eligibility, file your return, and save money.
Have questions about the QBI deduction? Let’s talk!