As either a sole proprietor or an S corp owner, you do! This deduction is given to anyone that has a Schedule C, Profit or Loss from Business, or a Schedule K-1 from their S corp on their Form 1040.
Unfortunately, as a mental health professional, you are considered a “Specified Service Business”, which means that you are limited in your ability to apply the advantageous deduction. As a Specified Service Business, the 20% deduction begins to phase out at an income of $157,000, becoming completely inapplicable at $207,000 in annual income.
Further information
The qualified business income (QBI) deduction, also known as Section 199A, allows owners of pass-through businesses to claim a tax deduction worth up to 20 percent of their qualified business income. It was introduced as part of the 2017 tax reform called the Tax Cuts and Jobs Act (TCJA.) Generally this includes, but is not limited to: the deductible part of self-employment tax, self-employed health insurance, and deductions for contributions to qualified retirement plans (e.g. SEP, SIMPLE and qualified plan deductions).
You may have a chance to reduce your self-employment income further by claiming the qualified business income (QBI) deduction. This allows you to reduce your pass-through income from self-employment or owning a small business by up to 20% on your tax return. This deduction is most relevant at the end of the year when you file your 1040 personal tax return.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.