The Need for Financial Planning: The New “QBI” Deduction

“The Need for Financial Planning” covers financial planning topics and ties in data suggesting the opportunity for new and prospective advisors to improve America’s financial health.


As we recently covered, the new tax law titled the Tax Cut Jobs Act brought in the most significant changes to tax planning in several decades. These big changes bring the need for advisor guidance in helping clients navigate the new rules.

One of the more significant parts of the new law is a new deduction for business owners. Dubbed the Section 199A deduction, or QBI (Qualified Business Income) deduction, its purpose is to maintain the tax benefit (no double taxation) that certain entities (called pass-through entities) offered in contrast to C corporations (since new, reduced tax rates for C corporations reduced this benefit).

Certain individuals, estates, and trusts will now be allowed a 20% deduction of the lesser of qualified business income or taxable income, as a reduction to taxable income. There are certain limitations, however, including a wage limitation as well as restrictions for service businesses.

Still, the QBI deduction can make a significant impact for taxpayers. As such, it provides yet another planning opportunity for advisors to add value for clients.


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