The QBI deduction (Section 199A) allows owners of pass-through businesses (sole proprietorships, partnerships, S-Corps, and some trusts) to deduct up to 23% of their qualified business income from federal taxable income starting in 2026, permanently extended and enhanced under the OBBBA. Employees and C-Corp shareholders do not qualify.

SSTBs are businesses in fields like law, health, financial services, accounting, actuarial science, performing arts, consulting (in the narrow IRS sense), athletics, and brokerage services. For SSTB owners with income above the phase-out thresholds (approximately $197,300 single / $394,600 MFJ in 2026), the QBI deduction phases out completely. Below the threshold, SSTB owners get the full deduction. The "consulting" SSTB is narrowly defined — many business advisors and management consultants do not qualify as SSTBs.

For non-SSTB businesses, the deduction is limited to the greater of: (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. These limitations apply when taxable income exceeds approximately $197,300 (single) or $394,600 (MFJ) in 2026. Below these thresholds, the full 23% deduction applies without the W-2 wage limitation.

For S-Corp owners, the QBI deduction applies to the S-Corp's qualified business income — which is the net income after the owner's reasonable salary is deducted. The salary itself is not QBI. This creates a tension: a lower salary increases QBI (and the deduction) but also increases the W-2 wage limitation at higher income levels. Uncle Kam can model the optimal salary to maximize the combined QBI deduction and SE tax savings.

Yes — the OBBBA permanently extended and enhanced the QBI deduction, increasing it from 20% to 23% starting in 2026. It no longer faces a sunset date. This is one of the most significant permanent tax changes for self-employed individuals and pass-through business owners.

Self-employed individuals can choose from a SEP-IRA (up to 25% of net self-employment income, max $72,000 in 2026), a Solo 401(k) (up to ~$70,000 plus $7,500 catch-up if over 50), a SIMPLE IRA, or a Defined Benefit Plan (which can shelter $100,000+ annually for high earners). The Solo 401(k) is typically the best option for most self-employed individuals because it allows both employee deferrals and employer contributions.

In 2026, a Solo 401(k) allows up to $24,500 as an employee deferral (plus $7,500 catch-up if over 50) plus up to 25% of net self-employment income as an employer contribution, for a combined maximum of approximately $70,000 ($77,500 with catch-up). This is significantly higher than a SEP-IRA for most income levels.

Generally no — you cannot contribute to both a Solo 401(k) and a SEP-IRA for the same self-employment income in the same year. However, you can have a Solo 401(k) for your self-employment income and participate in an employer's 401(k) at a day job, though combined employee deferrals across all plans are capped at $24,500 in 2026.

You must establish a Solo 401(k) by December 31 of the tax year to make employee deferrals for that year. Employer profit-sharing contributions can be made up to the tax filing deadline (including extensions). A SEP-IRA, by contrast, can be established and funded up to the tax filing deadline.

No — retirement contributions reduce income tax but not self-employment tax. SE tax is calculated on net self-employment income before retirement contributions. However, the deduction for half of SE tax reduces your AGI, which in turn reduces the base on which retirement contribution limits are calculated.

A home office must be used regularly and exclusively for business — a dedicated room or clearly defined space used only for work. A kitchen table where you occasionally work does not qualify. The space must be your principal place of business or where you meet clients.

No. The Tax Cuts and Jobs Act of 2017 eliminated the home office deduction for W-2 employees through 2025. Only self-employed individuals, freelancers, and business owners can currently claim the home office deduction.

You can deduct the business-use percentage of your internet bill. If your home office is 10% of your home's square footage, you can deduct 10% of your internet costs. If you use the internet exclusively for business (a separate business line), you can deduct 100%.

The simplified method allows you to deduct $5 per square foot of your home office, up to 300 square feet ($1,500 maximum). It is easier to calculate but often produces a smaller deduction than the actual expense method for most homeowners.

The home office deduction is not an automatic audit trigger. The IRS does scrutinize it, but a properly documented, legitimate home office is fully defensible. The key is the "exclusive use" requirement — the space must be used only for business, not as a guest room or general living area.

To substantiate your Education Business Expense deductions, you should maintain detailed records including receipts for tuition, fees, books, supplies, and transportation. It's also crucial to keep documentation demonstrating how the education maintains or improves skills required in your current business or job, or meets the express requirements of your employer or the law. This could include course descriptions, employer directives, or professional licensing requirements. These records are essential in case of an IRS audit, as outlined in IRS Publication 529, Miscellaneous Deductions.

Yes, you can deduct travel expenses related to your Education Business Expense if the education qualifies as a deductible business expense. This includes costs for transportation, meals (subject to the 50% limitation), and lodging while away from home primarily to obtain the education. However, if the primary purpose of your travel is personal, you cannot deduct the travel costs, though you may still deduct the education expenses themselves. Refer to IRS Publication 463, Travel, Gift, and Car Expenses, for specific guidance on deductible travel costs.

While there isn't a specific dollar limit on the Education Business Expense itself, the deduction is subject to the general rules for business expenses. For self-employed individuals, these expenses are typically deducted on Schedule C (Form 1040), Profit or Loss From Business, reducing your net earnings. For employees, these expenses are no longer deductible as miscellaneous itemized deductions subject to the 2% AGI limit, as that deduction was suspended from 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA). Therefore, for 2026, employee education expenses are generally not deductible unless reimbursed by your employer under an accountable plan.

An Education Business Expense is deducted on your tax return as a business expense, reducing your taxable income. To qualify, the education must maintain or improve skills needed in your current job or business, or be required by your employer or law. In contrast, qualified education expenses for tax credits (like the American Opportunity Tax Credit or Lifetime Learning Credit) are typically for undergraduate or graduate education at an eligible educational institution, and the credits directly reduce your tax liability. You generally cannot claim both a business deduction and a credit for the same educational expenses, as per IRS Publication 970, Tax Benefits for Education.

No, you generally cannot deduct your Education Business Expense if it qualifies you for a new trade or business. The IRS specifically disallows deductions for education that either meets the minimum educational requirements of your present trade or business or qualifies you for a new trade or business. For example, if you are an accountant and take courses to become a lawyer, those expenses would not be deductible as an Education Business Expense because they qualify you for a new profession. This rule is outlined in Treasury Regulation §1.162-5.

Self-employed individuals pay 15.3% self-employment tax (covering Social Security and Medicare) on net self-employment income. The IRS allows you to deduct 50% of the SE tax paid as an above-the-line deduction on Schedule 1 of your Form 1040. This deduction reduces your adjusted gross income and is available regardless of whether you itemize.

The deduction equals 50% of your total SE tax. For someone with $100,000 in net SE income, the SE tax is approximately $14,130, and the deduction is $7,065. At a 24% marginal rate, this saves $1,696 in income taxes — on top of the SE tax already paid.

No. The SE tax deduction is an above-the-line deduction, meaning it reduces your adjusted gross income (AGI) regardless of whether you take the standard deduction or itemize. It is one of the most straightforward and universally available deductions for self-employed individuals.

The most effective way to reduce SE tax is to elect S-Corp status. As an S-Corp, you pay SE tax (payroll taxes) only on your reasonable salary — not on the full profit. Distributions above the salary are not subject to SE tax. For someone earning $150,000+ net, this can save $10,000–$20,000/year.

No. They are separate deductions. The SE tax deduction (50% of SE tax paid) reduces your AGI. The QBI deduction (up to 23% of qualified business income under the OBBBA) is a separate below-the-line deduction that reduces taxable income. Both are available to self-employed individuals and can be claimed simultaneously.