Can I claim Qualified Business Income Deduction for my side hustle?

You absolutely can claim the Qualified Business Income Deduction (QBI) for your side hustle! The 20% deduction applies to your net profit from the business (revenue minus expenses), not your gross revenue. So in your case, you'd calculate it based on your $13,600 profit ($22,000 - $8,400). Being a sole proprietor is perfectly fine for claiming QBI - no need for a formal business entity. You'll report your woodworking business on Schedule C, which calculates your net profit, and then the QBI deduction itself is calculated on Form 8995 or 8995-A. The basic threshold limits to be aware of are $170,050 for single filers or $340,100 for married filing jointly (for 2025). Since your total income (job + side business) is under that threshold, you should qualify for the full 20% deduction without complications. Just make sure you're keeping good records of all your business expenses to substantiate your deductions.

When I was trying to figure out this exact thing last year, I spent weeks going back and forth with my tax software trying to understand if I qualified. I finally found this tool called taxr.ai (https://taxr.ai) that actually analyzed my business income situation and explained exactly how the QBI deduction worked for my case. The biggest help was that it looked at my previous returns and gave me personalized guidance rather than the generic advice I kept finding online. It showed me that I had been overpaying my quarterly estimated taxes because I wasn't factoring in the QBI deduction correctly. For a side business like yours, it's really helpful because it treats your situation as unique instead of trying to apply one-size-fits-all rules.

I was really skeptical about taxr.ai when I saw it mentioned here, but I decided to give it a try since I was completely stuck on my QBI calculation. I had a rental property AND a side consulting gig and couldn't figure out how they interacted for the deduction. Honestly, it was super helpful. I uploaded my previous year's return and got a personalized explanation of exactly which income qualified for QBI and which didn't. The rental property created some complications because of the "qualified trade or business" rules, but the tool actually flagged this and explained why certain rental activities might not qualify without additional documentation. Saved me hours of research and probably a few hundred dollars in deductions I would have missed! Way better than the generic advice I was finding elsewhere.

If you're trying to get clarification directly from the IRS about your Qualified Business Income Deduction situation, good luck with that! I spent 3 weeks trying to get through to someone who actually understood QBI rules. Kept getting disconnected or waiting for hours. I finally tried this service called Claimyr (https://claimyr.com) that actually got me connected to an IRS agent in about 15 minutes. They have this demo video (https://youtu.be/_kiP6q8DX5c) that shows exactly how it works. I was super skeptical, but I was desperate after wasting so many hours on hold. The IRS agent I talked to was able to clarify that my woodshop teaching classes qualified differently than just selling products, which affected my QBI calculation. Definitely worth it to get an official answer straight from the source rather than guessing.

So I need to eat some crow here. After being super skeptical about Claimyr in my comment yesterday, I actually tried it this morning because I was desperate to get an answer about my QBI deduction before filing my taxes. I'm shocked to say it actually worked. Got connected to an IRS agent in about 20 minutes (not 15, but still WAY better than the 3+ hours I waited last time). The agent clarified that my therapy practice DOES qualify for the QBI deduction even though healthcare is partially in the "specified service business" category, because my income is under the threshold. I've spent weeks stressing about this and could have just gotten a straight answer from the IRS if I hadn't been dreading the phone call. Definitely saving this service for next year.

Just wanted to add something that tripped me up with QBI - if you have capital gains, those DON'T count toward your qualified business income. I messed this up last year and had to file an amendment. The QBI deduction only applies to your ordinary business income, not investment returns or capital gains from selling business assets. Also keep in mind that certain "specified service trades or businesses" (like healthcare, law, accounting, etc.) have those special limitations if your income is above certain thresholds. Doesn't sound like that applies to your woodworking business though!

Has anyone used TurboTax for calculating QBI? I tried using it last year and it seemed to miss some deductions. Wondering if H&R Block or TaxAct handle it better for self-employed people?

One thing to keep in mind with your woodworking business - make sure you're tracking ALL your eligible expenses. Beyond the obvious materials and tools, you can also deduct things like: - Portion of your home utilities if you're using garage space exclusively for business - Vehicle expenses for trips to buy materials or deliver furniture - Business insurance premiums - Professional development (woodworking classes, trade shows) - Marketing costs (website, business cards, photography of your work) The more legitimate business expenses you can document, the higher your net profit calculation will be for the QBI deduction. Just make sure you're keeping detailed records and receipts for everything. The IRS loves to see good documentation, especially for home-based businesses. Also, since you're making decent money from this side hustle, you might want to consider making quarterly estimated tax payments to avoid underpayment penalties. The QBI deduction helps, but you'll still owe self-employment tax on that $13,600 profit.