The qualified business income (QBI) deduction can be taken by individuals who own sole proprietorships, partnerships, S corporations, and certain trusts and estates. It is limited to twenty percent of a taxpayer’s qualified business income, as well as twenty percent of REIT (Real Estate Investment Trust) dividends, and PTP (Publicly Traded Partnership) income. The deduction could be further limited for those taxpayers whose taxable income exceeds certain annual thresholds.

It does not matter whether a taxpayer chooses to itemize their deductions or takes the standard deduction on his or her return to be able to take the QBI deduction. Items that are not classified as QBI include but are not limited to wages, certain dividends, guaranteed payments from a partnership, reasonable compensation from an S corporation, interest income not allocated to a trade or business, and annuities.