A Simplified Guide to IRS Form 89.95: QBI Deduction for Schedule C Taxpayers

TLDRLearn how to calculate the qualifying business income deduction for Schedule C taxpayers using IRS Form 89.95. Understand the basics of the QBI deduction, its limitations, and how it can lower your taxable income.

Key insights

📝The QBI deduction allows taxpayers with qualified business income to deduct a portion of their earnings.

🗣️The QBI deduction is limited to 20% of taxable income before the deduction, subject to certain thresholds.

💼Sole proprietors and single-member LLC owners can use IRS Form 89.95 to calculate their QBI deduction.

💰The QBI deduction can help lower the amount of taxes owed by reducing taxable income.

📑Taxpayers should be aware of limitations and exceptions related to the QBI deduction, such as the 199A cap and specified service trades or businesses.

Q&A

Who is eligible for the QBI deduction?

—Taxpayers with qualified business income from partnerships, S corps, or sole proprietorships may be eligible for the QBI deduction.

What is the purpose of IRS Form 89.95?

—Form 89.95 is used to calculate the simplified version of the QBI deduction for sole proprietors and single-member LLCs.

Are there limitations or phase-outs for the QBI deduction?

—Yes, there are limitations based on taxable income and exceptions for specified service trades or businesses (SSTBs).

How does the QBI deduction affect taxable income?

—The QBI deduction can lower taxable income by allowing eligible taxpayers to deduct a portion of their qualified business income.

Can the QBI deduction be claimed by employees or individuals with investment income?

—No, the QBI deduction is generally available only to taxpayers with qualified business income from partnerships, S corps, or sole proprietorships.

Timestamped Summary

00:01This video explains how to calculate the QBI deduction using IRS Form 89.95 for Schedule C taxpayers.

05:32The QBI deduction allows taxpayers to deduct a portion of their qualified business income.

08:51IRS Form 89.95 is used to calculate the deduction for sole proprietors and single-member LLC owners.

10:31The QBI deduction is subject to limitations and exceptions, such as the 199A cap and specified service trades or businesses.

11:33Taxpayers with qualified business income can use the QBI deduction to lower their taxable income.

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