QBI

Qualified Business Income refers to the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business operated as a pass-through entity. The QBI deduction, established by the Tax Cuts and Jobs Act, allows eligible taxpayers to deduct up to 20% of qualified business income from partnerships, S corporations, and sole proprietorships.

For government contractors operating as pass-through entities, understanding QBI implications affects business structure decisions and tax planning. Specified service trades or businesses face income limitations on the deduction. Contractors should consult tax advisors to optimize their structure and ensure compliance with QBI rules while maximizing available deductions.