Many owners of partnerships, S Corporations, sole proprietorships, and rental real estate ventures can now earn up to 20% of their Qualified Business Income (“QBI”) tax-free through the QBI deduction. For those who claim the 20% QBI deduction, the IRS has made a notable change for 2019 filings. The 2019 instructions direct tax preparers to reduce potential QBI by charitable contributions made by these businesses. Reducing QBI would reduce the potential QBI deduction, thus reducing possible tax benefits.
We strongly advise consulting your CPA or tax advisor to determine whether your business is eligible for the QBI deduction and the potential tax effects before making any charitable contributions from your business.
Charitable contributions made personally, rather than by a business, will not reduce Qualified Business Income. If you are a taxpayer who itemizes deductions, rather than claiming the standard deduction, your contributions remain deductible without reducing your QBI. Learn more about the deduction with our QBI deduction flow chart.
For more information, please feel free to contact us.