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What is the Qualified Business Income Deduction?

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The Qualified Business Income Deduction (QBI deduction), also known as the Section 199A deduction, is a provision in the U.S. tax code that allows certain taxpayers to deduct up to 20% of their qualified business income from a qualified trade or business.

 Key Points:

Who qualifies?

  • Individuals, partnerships, S corporations, trusts, and estates with income from:

    • Sole proprietorships

    • Partnerships

    • S corporations

    • Certain REIT dividends and publicly traded partnerships

What businesses are excluded or limited?

  • Specified Service Trades or Businesses (SSTBs) may be limited or excluded if the taxpayer’s income exceeds a threshold. These include:

    • Health

    • Law

    • Accounting

    • Actuarial science

    • Performing arts

    • Consulting

    • Athletics

    • Financial services

    • Investing and investment management

    • Any business where the principal asset is the reputation or skill of one or more of its employees or owners

Income Thresholds (2025 estimates):

For 2025 (inflation-adjusted), phase-out begins around:

  • $200,000 for single filers

  • $400,000 for joint filers
    (Exact thresholds are adjusted annually.)

If your taxable income is below the threshold, you generally qualify for the full 20% deduction—regardless of the type of business.

If above, additional rules apply:

  • Wage and capital limit: Deduction may be limited based on W-2 wages paid or qualified property held by the business.

  • SSTBs start to phase out.

What is “Qualified Business Income” (QBI)?

QBI includes:

  • Net income from a qualified business (e.g., a sole proprietorship, S corp, or partnership)

  • Excludes wages, capital gains/losses, dividends, and interest income

Example:

You own a plumbing business as a sole proprietor and earn $100,000 in qualified business income:

  • If you’re under the income threshold, you could deduct up to $20,000 (20% of $100,000) from your taxable income.

Why it matters:

  • The QBI deduction effectively lowers the tax rate on business income for many small business owners and self-employed individuals.

  • It’s a non-itemized deduction, so you can claim it even if you take the standard deduction.

Tax Planning for the Solopreneur

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Tax planning is critical for solopreneurs — individuals who run their own businesses without employees — because it directly affects cash flow, compliance, and long-term financial health. Here’s a comprehensive guide to tax planning for solopreneurs:

 1. Choose the Right Business Structure

Your business structure impacts your taxes, liability, and compliance.

Options:

  • Sole Proprietorship: Easiest to set up; taxed on your personal return via Schedule C.

  • LLC (Single-Member): Offers liability protection; taxed similarly to a sole proprietorship unless you elect otherwise.

  • S Corporation (S-Corp): May reduce self-employment taxes by allowing salary + dividends.

  • C Corporation: Rare for solopreneurs due to double taxation.

?? Tax Tip: Consider consulting a CPA to evaluate if electing S-Corp status can save you money.

 2. Track Income and Expenses Diligently

Good bookkeeping is the foundation of effective tax planning.

Tools to Use:

  • QuickBooks

  • Excel or Google Sheets (if you’re just starting)

Common Deductible Expenses:

  • Office supplies

  • Software subscriptions

  • Marketing costs

  • Home office expenses

  • Internet and phone bills (proportionate to business use)

  • Business travel & meals

  • Health insurance (self-employed deduction)

  • Continuing education

? Pro Tip: Keep digital copies of all receipts and categorize expenses monthly.

 3. Understand Self-Employment Tax

As a solopreneur, you pay:

  • Income tax

  • Self-employment tax (15.3% total for Social Security and Medicare)

You can deduct the employer half (7.65%) of your self-employment tax on your 1040.

 4. Make Quarterly Estimated Tax Payments

You’re responsible for paying your taxes throughout the year.

Due Dates (2025 Example):

  • Q1: April 15

  • Q2: June 15

  • Q3: September 15

  • Q4: January 15 (2026)

Use Form 1040-ES to calculate and pay.

? Safe Harbor Rule: Pay 100% of last year’s taxes (or 110% if income > $150,000) to avoid penalties.

 5. Leverage Retirement Contributions

You can reduce taxable income while saving for retirement.

Options:

  • Solo 401(k): Up to $69,000 in 2024 ($76,500 if age 50+)

  • SEP IRA: Up to 25% of net income, max $69,000 (2024)

  • Traditional or Roth IRA: $7,000 limit ($8,000 if 50+)

  • Defined Benefit Plan

? These accounts grow tax-deferred or tax-free (Roth).

6. Home Office Deduction

If you use part of your home exclusively and regularly for business, you can deduct:

  • A portion of rent/mortgage

  • Utilities

  • Repairs

  • Insurance

Methods:

  • Simplified method: $5/sq ft (up to 300 sq ft)

  • Actual expense method: Percentage of home used

7. Deduct Health Insurance Premiums

If you’re self-employed and not eligible for a group plan, you can deduct your premiums above the line, reducing your AGI.

8. Mileage and Vehicle Use

Track business mileage:

  • 2024 IRS rate: 67 cents/mile

You can also deduct actual expenses (fuel, insurance, maintenance) if using actual method.

? Apps like MileIQ or Everlance make this easy.

 9. Plan for Tax-Advantaged Accounts

  • HSA (Health Savings Account): If on high-deductible plan, you can contribute pre-tax.

  • 529 Plans: For education savings (not deductible federally but grows tax-free).

10. Work with a Tax Professional

An accountant or enrolled agent can:

  • Perform quarterly planning to plan on reducing your tax liability

  • Identify missed deductions

  • Help with S-Corp election

  • Avoid red flags that trigger audits

 Final Checklist for Solopreneurs

  • Separate business and personal finances (open a business bank account)

  • Track all income and expenses monthly

  • Pay quarterly estimated taxes

  • Maximize deductions and retirement contributions

  • Review tax plan Quarterly

Projects That Add to the Value of Your Home

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Middle aged couple at home planning living room designYou only have to look at the number of home remodeling shows on television to understand just how many people enjoy watching others upgrade their living spaces. These popular home remodeling shows have inspired many people to try their own hands at various remodeling projects.

If you are interested in having work done on your living space or doing it yourself, you should understand that some remodeling and construction projects will enhance the value of your home as well as its appearance. Other remodeling projects may be on your wish list and make you happy but won’t materially affect the value of your home.

What projects will add to the value of your home? According to the “2023 Cost vs. Value Report” conducted by Remodeling, a leading trade publication/platform, the top five renovations that increase — or come close to increasing — home value are as follows:

HVAC Conversion

Switching out your fossil-fuel burning furnace to a more environmentally friendly alternative — an electric heat pump — is an expensive undertaking but easily recoups its cost. Typically, the cost of converting a 2,000-square-foot home to an electric heat pump is estimated to be $17,747, but the report notes that it adds about $18,366 to the home’s resale value — a 103.5% return on the investment.

Garage Door Replacement

A new garage door definitely enhances a home’s curb appeal and easily recoups its initial cost. The report found that removing and disposing a 16- by 7-foot garage door and replacing it with four-section doors with heavy galvanized steel tracks would cost $4,302 on average but would boost the home’s resale value by $4,418, a 102.7% return on investment.

Manufactured Stone Veneer

Stone veneer has grown in popularity amongst homeowners looking to craft a warm and welcoming feel to their homes’ exterior. It costs an estimated $10,925 to install 36 linear feet of sills, 40 linear feet of corners, an address block, and other materials, including water-resistant and corrosion-resistant barriers. However, homeowners will recoup 102.3% of the project’s cost if they put their home on the market.

Replacing an Entry Door

New front doors can help improve a home’s energy efficiency as well as enhance its appearance. Replacing an old entry door with a new steel one will cost an average of $2,214 but will increase your home’s resale value by $2,235, recouping 102.9% of its original cost.

Replacing Siding

Replacing a home’s siding is an expensive undertaking, but it is one project that delivers immediate eye appeal. New siding refreshes a house’s appearance and adds to the neighborhood’s overall desirability. The report looked at the costs of installing both fiber-cement siding and vinyl siding. It found that the average cost of installing 1,250 square feet with fiber-cement siding would run a homeowner $19,361. The homeowner would expect to recoup 88.5% of the cost of the project, or $17,129. Installing new vinyl siding would be less costly than fiber-cement siding. Siding for a 1,250-square-foot house would cost an estimated $16,348, and the homeowner could expect to get back around 94.7% of that total cost at resale.

Be aware that labor costs vary from state to state and from community to community. The cost of materials fluctuates, sometimes considerably, depending on inflation, supply chain issues, and other economic and political forces.

Transform Your Business Operations by Harnessing the Power of AI

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Handshake of man and robot. Modern technologies. Art collage.Artificial Intelligence (AI) has emerged as a transformative force in virtually every industry, revolutionizing the way businesses operate and interact with their customers. From streamlining processes to unlocking valuable insights, the potential applications of AI are vast and varied. In this article, we explore how AI can help improve a business across multiple dimensions, driving efficiency, innovation, and growth.

Enhanced Decision-Making with Data Analytics

One of the most significant advantages of AI for businesses is its ability to analyze vast amounts of data quickly and accurately. AI-powered analytics tools can sift through complex datasets to uncover actionable insights, enabling informed decision-making at every level of the organization. By leveraging predictive analytics, businesses can anticipate market trends, identify opportunities, and mitigate risks, gaining a competitive edge in today’s fast-paced business landscape.

Personalized Customer Experiences

AI-driven technologies, such as machine learning algorithms and natural language processing, have revolutionized the way businesses interact with their customers. Through personalized recommendations, chatbots, and virtual assistants, companies can deliver tailored experiences that resonate with individual preferences and needs. By harnessing the power of AI to understand customer behavior and sentiment, businesses can build deeper, more meaningful relationships, driving customer satisfaction and loyalty.

Streamlined Operations and Automation

Automation lies at the heart of AI-driven transformation, offering businesses the opportunity to streamline operations and improve efficiency. AI-powered software robots can perform repetitive tasks with speed and accuracy, freeing up human resources to focus on more strategic initiatives. Whether automating invoice processing, supply chain management, or customer service inquiries, AI enables businesses to reduce costs, minimize errors, and scale operations more effectively.

Predictive Maintenance and Asset Management

In industries such as manufacturing, energy, and transportation, AI plays a critical role in predictive maintenance and asset management. By analyzing sensor data in real-time, AI algorithms can detect anomalies and predict equipment failures before they occur, enabling proactive maintenance and minimizing downtime. This predictive approach not only enhances operational efficiency but also extends the lifespan of assets, resulting in significant cost savings over time.

Risk Management and Fraud Detection

AI-powered systems are increasingly being deployed to enhance risk management and fraud detection capabilities. Machine learning algorithms can analyze vast amounts of transactional data to identify patterns indicative of fraudulent activity, enabling businesses to mitigate risks and safeguard their assets. Moreover, AI-driven risk models can adapt and evolve in response to changing threats, providing businesses with a proactive defense against emerging risks.

Unlocking Innovation and Creativity

Beyond its practical applications, AI has the potential to unlock new realms of innovation and creativity within organizations. By leveraging AI-driven tools for natural language generation, image recognition, and generative design, businesses can explore new possibilities and push the boundaries of what is possible. Whether designing products, creating content, or optimizing processes, AI empowers businesses to innovate at a pace never before imagined.

In conclusion, AI represents a powerful catalyst for improving business operations across multiple fronts. From data analytics and customer experiences to automation and innovation, the potential applications of AI are limitless. By embracing AI-driven technologies, businesses can unlock new opportunities, drive efficiency, and position themselves for success in an increasingly digital and competitive marketplace.

An HSA Can Also Be Used to Save for Retirement

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Health savings accounts (HSAs) were created as a savings vehicle to help people pay out-of-pocket medical expenses. If qualified, you can establish an HSA in much the same way you establish a traditional savings account or an individual retirement account. You can open one with a lump-sum payment or through regular contributions, usually through paycheck deductions.

What makes HSAs appealing is that they offer several valuable tax-saving features. For example, your contributions are excluded from deductible income, all account earnings accumulate tax free, and, as long as the medical expenses paid with HSA savings are “qualified” expenses for you, your spouse, or your dependents, withdrawals from HSAs are tax free also. It is these tax savings features plus the ability to invest contributions in longer term assets that can make HSAs viable as alternative retirement savings vehicles.

Before looking into how HSAs can be used to save for retirement, it can be helpful to explain how they actually work.

The Rules on Contributions

The maximum family contribution for 2024 is $8,300 plus a $1,000 maximum catch-up contribution for participants who are age 55 or more. For self-only coverage, the maximum contribution for 2024 is $4,150 plus a $1,000 catch-up contribution for those participants age 55 or more. The limits will be adjusted for inflation in future years. An individual’s employer or family member may contribute as long as the total contribution amount does not exceed the annual limit.

Investing Contributions

As a participant in an HSA, you have the choice of keeping contributions in cash or investing them in other assets, such as stock and bond mutual funds.* Money not spent on qualified expenses during the year is rolled over for subsequent years. If you are in fairly good health and underutilize medical and health services, you could potentially build up a relatively large balance in the HSA account over several years.

Making HSAs Work as Retirement Savings Vehicles

If you currently maximize contributions to all tax-favored retirement accounts and also save in taxable accounts, you could treat the HSA as one more option to increase your savings and do so in a tax-favored way. Essentially, you would treat the HSA as a retirement savings account and allow the assets in the account to accumulate for as long as possible while paying out-of-pocket medical costs with taxable funds. Of course, this approach does not work if you cannot fully fund all your tax-advantaged retirement savings vehicles.

Remember, each person’s situation is different and you will benefit from discussing this option — and other retirement savings options — with an experienced financial professional

Weighing Your Options: Promoting vs Hiring Externally

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Business people, hand shake and success in meeting, support and applause, hiring or onboarding with team. Collaboration, shaking hands and congratulations, promotion and achievement with diversityIt’s a quite common dilemma to figure out if you need to hire externally or promote from within to see improvement with your business. There are benefits to both. We will now go over the pros and cons to each side.

Hiring Externally 

Pros 

  • Can help a company gain new perspectives – Oftentimes, hiring a new candidate will allow businesses to gain new ideas that they would not have gotten internally. These hires could be from a different industry and their ideas could make a difference. They also might see flaws in your business model that you were too close to see. The external hires could help improve your business due to their original distance.
  • Gives you more people to consider –  When looking at a pool of candidates for a job, you are able to have a wider pool of people when hiring externally. If you hire internally, it’s going to be a smaller pool. You also could be exposed to people of higher skill sets than the employees you currently have on your team.
  • No conflict within the existing team – Employees in your business will not feel like they are competing for a position if it is already announced to be an external hire joining the team. This makes the environment calmer and you don’t need to worry about any potential conflict.

Cons 

  • More time and money searching – It can take a while to set up the hiring platforms and advertisements saying that you are looking to hire. If the need for a person is immediate, it will be hard to fill it right away due to the time setting up the logistics.
  • You don’t get all the information from their resume – At the end of the day, you only have a few interviews to be able to determine whether or not this person is good for the job. You can look at references but there still can be uncertainty with the offer.
  • You don’t know for certain that they will fit into the office dynamic – When people interview, they are on their best behavior and talk up their abilities and strengths. You can never be certain that they will fit in with your employees and your pace of work. You don’t know their true personality and how well that will mesh with the office environment.

Promoting from Within

Pros 

  • Positive morale for staff – Hiring from within shows that an employee’s work is valued and they will be rewarded for their time going above and beyond expectations. This will also show other employees that if they work hard, they could be promoted in the future. If the promotion is for a managerial role, people can feel more comfortable that they know who they will be working with than an outside recruit.
  • Keep your costs down – Internal recruits will save you money because you don’t need to spend money on external recruiting. You will not need to spend money on sites promoting your position.
  • You know the candidate – Interviews can be much more relaxed when you know the applicants from personally working with them. This allows you to skip the awkwardness of a first interview and ask them what they hope to contribute in the new position.

Cons

  • Stuck in an endless loop of filling positions – You probably will now need to fill in your promoted employee’s position unless they are just getting a promotion of responsibilities rather than a completely different title. This can be frustrating because you probably would have to hire an external candidate to end the repetition of hiring to fill.
  • Lack of change – You are keeping the same ideas that have been in your office already. This may promote a sense of conformity with ideas. The culture will continue to be the same because there is nothing causing a change. You just may lack some originality due to promoting and not hiring externally.
  • Competition between workers – People may become competitive with a position opening up. If employees don’t like the person who gets the promotion, they may leave because they don’t feel properly supported. They also may leave because they don’t feel valued if someone with less experience in the company gets the promotion instead of them.

Overall, consider your employees and the need within your organization to determine whether or not it would be more beneficial to promote or hire externally.