What is Qualified business income wage and property limits?
In short
Above an income threshold, the qualified business income deduction for each business is limited to the greater of 50% of its W-2 wages or 25% of W-2 wages plus 2.5% of the unadjusted basis of its qualified property.
Key takeaways
- The limit is phased in over an income range above the threshold, widened from 2026 by the One Big Beautiful Bill Act.
- Paying reasonable S corporation salaries increases W-2 wages, but also reduces business income.
- Businesses with large depreciable property can rely on the property part of the limit.
Where it's tested
TCP: Entity Choice & Structuring — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A C corporation with substantially appreciated assets wants to convert to an LLC taxed as a partnership. What is the primary tax consequence?