Limitations on QBI deduction

Last week we discussed how to calculate the Qualified Business Income Deduction, or QBID. This week we're diving into some of the limitations for the deduction. Taxpayers who have a household taxable income greater than certain thresholds, are subject to what is known as the wage and investment limit. For 2021, the threshold amounts are $326,600 for married taxpayers and $163,300 for everyone else. The limit is the greater of 50% of W-2 wages or 25% of the W-2 wages paid by the business plus 2.5% of the unadjusted basis of the business' qualified property. Further limits apply to certain types of professional service businesses (known as Specified Service Trade or Business). Professional guidance is strongly recommended to plan for and claim the QBID.