Qualified Business Income Deduction (QBID)

If a self-employed person qualifies for a QBID, it is calculated automatically on Form 8995 or 8995-A, and carried forward to Form 1040 line 10.

Since QBID is calculated automatically, the math associated with the calculation is out of sight. Following is an explanation of how QBID is calculated.

  1. Start with Gross Business Income (Schedule C line 7).
  2. Subtract Total Expenses (Schedule C line 28).
  3. Subtract Self-employed Health Insurance (Schedule 1 line 16).
  4. Subtract Self-employment Tax (Schedule SE, line 12).
  5. Add Self-employment Tax Adjustment (Schedule SE, line 13).
  6. Multiply the balance after step 5 by 20%. That is the QBID.