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Tax Strategy
Tax & Business Series

How to Qualify for the 20% Qualified Business Income (QBI) Deduction (Section 199A Guide)

  • Categories: Business
  • RehabSurge Team
  • January 3, 2023
  • 8 min read
Introduction: What Is the 20% QBI Deduction?

The Tax Cuts and Jobs Act (TCJA) introduced one of the most powerful tax benefits for business owners:

  • The 20% Qualified Business Income (QBI) Deduction (Section 199A)
This allows eligible businesses to:
  • Deduct up to 20% of their business income
  • Significantly reduce taxable income
  • Increase overall profitability
Who Qualifies for the QBI Deduction?
The deduction applies to pass-through entities, including:
  • Sole proprietors
  • Partnerships
  • S corporations
  • LLCs taxed as pass-through entities
  • However, qualification depends heavily on income level and business structure
Income Thresholds for Full Deduction
To qualify for the full 20% deduction, your taxable income must be below:

Single Filers

$157,500

  • Maximum taxable income

Married Filing Jointly

$315,000

  • Maximum taxable income
Phase-Out Limits
If your income exceeds:

Single

$207,500

Married

$415,000

  • Watch out: You may lose eligibility unless certain conditions are met
Why Some Businesses Lose the Deduction
If your income is too high, your deduction may be limited or eliminated due to:
  • Lack of W-2 wages paid
  • Lack of qualified depreciable property
  • Watch out: This is where many high-earning professionals lose out
Example: When the Deduction Is Lost
Let’s look at a real-world scenario:

Sam

Sole Proprietor

Business Income

$400,000

Taxable Income

$370,000

Structure

Operates as a sole proprietor

Field

Not in a restricted service field

👉 Result:

  • ❌ Sam gets ZERO QBI deduction
How an S Corporation Can Help
Switching to an S corporation structure can unlock the deduction.
How It Works
Instead of all income being treated as self-employment income:
  • The S corp pays you a reasonable salary
  • Remaining profits are treated differently for tax purposes
Example with S Corporation

Salary

$100,000

Remaining Income

Qualifies for QBI

Potential Benefits

✔ Save on self-employment taxes

~$10,871

✔ Gain QBI deduction

~$17,500

  • Result: This creates significant tax savings
Why Wages and Property Matter
For higher-income earners, the IRS requires:
  • W-2 wages paid by the business
  • Qualified depreciable property
  • Watch out: Without these, your deduction may be reduced or eliminated
Specified Service Businesses (Important Limitation)
Certain professions have stricter rules, including:
  • Healthcare providers
  • Consultants
  • Attorneys
  • Financial professionals
These businesses may:
  • Lose eligibility at higher income levels
  • Face stricter phase-out rules
When an S Corporation Makes Sense
You may benefit from an S corp if:
  • You earn over $200,000+ annually
  • You currently operate as a sole proprietor
  • You want to reduce self-employment taxes
  • You want to qualify for the QBI deduction
  • Key point: Proper structuring is key

Common Mistakes to Avoid

  • Not evaluating entity structure
  • Paying yourself an unrealistic salary
  • gnoring wage/property requirements
  • Missing QBI eligibility thresholds
  • Not consulting a tax professional
Why This Matters for Small Business Owners
The QBI deduction can:
  • Reduce taxable income by thousands
  • Improve cash flow
  • Increase long-term profitability
  • Key point: But only if structured correctly
How RehabSurge Supports Business Growth
At RehabSurge, we understand that many healthcare professionals are also:
  • Business owners
  • Independent contractors
  • Practice managers
As an online continuing education provider, we help you:
  • Stay compliant with licensing requirements
  • Build both clinical and business knowledge
  • Grow strategically
Our courses are accepted in:
California
New York
North Carolina
Other states with reciprocity
Final Thoughts: Don't Miss Out on a Major Tax Advantage

The 20% QBI deduction is one of the most valuable tax benefits available today.

👉 But it requires:

  • Proper planning
  • Strategic structuring
  • Professional guidance

The Right Entity Structure Can Unlock Thousands in Savings

📌 Next Step:

If you’re unsure whether you qualify:

👉 Speak with a tax professional to:

  • Evaluate your structure
  • Optimize your deductions
  • Maximize your savings

Smart tax planning isn't optional—it's essential for long-term success.

In This Article

Introduction: Understanding the Home Office Deduction

The home office deduction is one of the most valuable tax strategies available to business owners and self-employed professionals.

However, many people:

  • Assume they don’t qualify
  • Or misunderstand the IRS rules

 

👉 The IRS actually provides four distinct ways to qualify

Understanding these can help you:

  • Reduce taxable income
  • Increase deductions
  • Stay compliant

 

Basic IRS Requirements (Must Meet First)

Before qualifying under any category, your home office must meet:

✔ Exclusive Use

  • Used only for business
  • No personal use allowed

 

✔ Regular Use

  • Used consistently
  • Not occasional

 

👉 Without these two, you cannot claim the deduction

 

  1. Principal Place of Business (Cash Register Rule / Soliman Rule)

This is the most powerful way to qualify

 

What It Means

Your home office is where:

👉 Your income-producing activities are controlled or directed

 

Examples

  • Managing operations
  • Scheduling clients
  • Running business systems

 

Key Advantage

If your home office qualifies as your principal place of business:

👉 You can deduct:

  • Commuting mileage from home to other work locations

 

  1. Administrative or Management Activities

You qualify if your home office is used for:

  • Billing
  • Documentation
  • Scheduling
  • Business planning

 

Critical Requirement

👉 You must NOT have another fixed location for these tasks

 

Example

A clinic owner who:

  • Treats patients at a clinic
  • Handles all admin work at home

👉 Qualifies under this rule

 

  1. Meeting Clients or Patients at Home

You may qualify even if your home is not your main office.

 

Requirement

You regularly meet:

  • Patients
  • Clients
  • Customers

👉 In your home office

 

Examples

  • Consultations
  • Evaluations
  • Business meetings

 

👉 This is considered a non-principal office deduction

 

  1. Detached Structure

This is often the simplest qualification method.

 

What It Means

You use a structure that is:

  • Separate from your home
  • Used exclusively for business

 

Examples

  • Converted garage
  • Backyard office
  • Detached clinic space

 

👉 No need to qualify as principal place of business

 

Why Principal Place of Business Is the Best Strategy

Among all four methods:

👉 Principal place of business provides the greatest tax advantage

 

Big Benefit

  • Deduct commuting mileage from:

        ◦ Home → clinic

        ◦ Home → job sites

        ◦ Home → business locations

 

👉 This can significantly increase your total deduction

 

Common Mistakes to Avoid

  • ❌ Using space for both personal and business use
  • ❌ Not tracking usage
  • ❌ Claiming without proper documentation
  • ❌ Having another office but claiming admin use
  • ❌ Poor record keeping

 

Documentation You Must Maintain

To support your claim, keep:

  • Photos of your workspace
  • Utility bills
  • Expense receipts
  • Floor plan measurements
  • Work activity logs

 

👉 Proper documentation is critical for IRS compliance

 

Who Should Consider This Deduction?

This strategy is ideal for:

  • Physical therapy clinic owners
  • Consultants
  • Telehealth providers
  • Independent contractors
  • Small business owners

 

👉 If you run any part of your business from home, this likely applies to you

 

How RehabSurge Supports Business-Minded Professionals

At RehabSurge, we understand that many healthcare professionals are also:

  • Entrepreneurs
  • Practice owners
  • Independent providers

 

As an online continuing education provider, we help you:

  • Stay compliant with licensing requirements
  • Expand both clinical and business knowledge
  • Grow strategically

Our courses are accepted in:

  • California
  • New York
  • North Carolina
  • Other states

 

Final Thoughts: Maximize Your Deduction the Right Way

The home office deduction is:

👉 Completely legal—and highly valuable when used correctly

 

The key is:

  • Understanding qualification methods
  • Keeping proper records
  • Applying the rules correctly

 

📌 Next Step:

If you believe you qualify, consult a tax professional to:

  • Structure your deduction properly
  • Maximize tax savings
  • Avoid audit risks

 

Smart tax strategies start with understanding the rules—and using them to your advantage.