Why does the QBI deduction seem pointless for my small business taxes?

Wait, so if my husband's construction business made around $75k this year, would the QBI deduction be worth about $15k (20% of $75k)? That seems huge! Is there a catch I'm missing? And does it matter if we file jointly or separately?

For your husband's construction business with $75k in qualified business income, the potential QBI deduction would indeed be up to $15k (20% of $75k). The construction industry generally qualifies for the full deduction since it's not considered a "specified service business" with income limitations. Filing jointly or separately can affect your total household income, which might impact the QBI if you're near the income thresholds where the deduction begins to phase out. For 2024, these phase-outs begin at $364,200 for joint filers and $182,100 for other filers. Most people benefit more from filing jointly, but individual situations vary.

Does taxr.ai work if you've already filed? I just submitted my taxes last week but now I'm wondering if I missed something with my wife's Etsy business and the QBI deduction. TurboTax did mention it but I kinda clicked through without really understanding.

I'm skeptical of any tax service that isn't one of the major players. How does it work with complicated situations? I have rental income plus a side business plus W2 income. Can it actually handle the QBI calculations across multiple income streams or is it more for simple returns?

Yes, taxr.ai works even if you've already filed. You can upload your completed return and it will analyze whether you optimized all your deductions including QBI from your wife's Etsy business. If it finds issues, you'd still have time to file an amended return. The service actually specializes in complex tax situations with multiple income streams. It can analyze how QBI applies across your rental income, side business, and how it interacts with your W2 income. It's particularly good at identifying when income streams are being properly categorized for maximum QBI benefit, which is often missed even by experienced preparers.

How long did it take to actually get the callback once you used the service? I'm still waiting to hear about my amended return with QBI adjustments from 3 months ago and getting nowhere with the regular IRS number.

This sounds like a scam. Why would anyone pay for something the IRS provides for free? I'm sure if you just keep calling at the right times you'll eventually get through. I don't see how a third party could actually get you better access than calling yourself.

I received my callback the same day, within about 2 hours of using the service. For amended returns with QBI adjustments, they can connect you directly with the department that handles those specific issues, which might help you get more precise information than the general helpline. I thought exactly the same thing before trying it! I spent 8 days trying to reach someone myself, calling at all different times including right when they opened. The service works because they use technology to navigate the IRS phone system and hold your place in line, then call you when an agent is actually available. It's not providing anything the IRS doesn't offer - it's just handling the frustrating waiting process for you.

There's an income phaseout for the QBI deduction. For 2024, if you file jointly and have taxable income over $364,200, the deduction starts getting reduced. With your combined income at $220k, you should still get the full 20% though. Did you have business losses or other adjustments? Sometimes the "qualified" part of business income isn't the same as your total business income.

We definitely don't make enough to hit the phaseout threshold, so that's not it. There weren't any business losses - the carpentry business was profitable all year. I'm wondering if TurboTax is calculating the QBI based on the net profit after expenses rather than gross income? Maybe that's why it's lower than I expected. I'll double check our Schedule C to see what's being reported as the actual qualified business income amount. Thanks for pointing out the difference between total business income and qualified business income!

Yes, the QBI deduction absolutely applies to single-member LLCs taxed as sole proprietorships! Your business structure is perfect for this deduction. With $62,000 in profit reported on Schedule C, you should generally qualify for a QBI deduction of around $12,400 (20% of your profit). This deduction reduces your taxable income, not your tax directly. So if you're in the 22% tax bracket, this could save you approximately $2,728 in federal taxes. You can verify this by looking at your Form 1040, page 2, line 13. That's where the QBI deduction amount should appear on your tax return.