What amount of qualified business income (QBI) deduction can Joseph and Rachel claim?

The correct amount of qualified business income (QBI) deduction that Joseph and Rachel can claim is based on their eligible income and the application of the QBI deduction rules as defined under the Tax Cuts and Jobs Act. For most taxpayers, this deduction is generally set at 20% of the qualified business income they generate from pass-through entities such as partnerships, S corporations, or sole proprietorships.

In this context, if Joseph and Rachel's total qualified business income amounts to $132,000, for instance, applying the 20% deduction would yield a calculation of $26,400 (which is 20% of $132,000). This deduction is designed to provide relief for small businesses and incentivize business investment, enhancing the income they can claim on their tax return.

It’s important to note that the QBI deduction can be subject to limitations based on taxable income levels and the nature of the business. However, if their taxable income and the nature of their business allow for the full deduction, the amount they would be able to claim is indeed $26,400.