Self-Employment and Business Taxes Flashcards

The Qualified Business Income (QBI) deduction under Section 199A allows eligible self-employed taxpayers to deduct up to what percentage of QBI?

Answer: 20%

Section 199A allows a deduction of up to 20% of qualified business income from pass-through entities and sole proprietorships.

A self-employed person's net loss from Schedule C may:

Answer: Reduce other income on the tax return (subject to at-risk rules)

Schedule C losses from an active trade or business can offset other income on Form 1040 subject to at-risk and basis limitations.

Which of the following expenses is NOT deductible on Schedule C?

Answer: Personal vacation expenses

Personal vacation expenses are not deductible business expenses; only the business portion of a trip with both business and personal elements is deductible.

Section 179 expensing allows a business to:

Answer: Immediately deduct the full cost of qualifying property in the year of purchase

Section 179 allows immediate expensing of qualifying business property rather than depreciating it over its useful life.

A self-employed person with no employees wants to open a retirement plan with the highest possible contribution. Which plan is best?

Answer: Solo 401(k)

A Solo 401(k) allows contributions both as employee ($23,000 in 2024) and employer (up to 25% of compensation), potentially exceeding SEP-IRA limits.

A self-employed consultant uses the actual expense method for vehicle deductions. Which record is most important to maintain?

Answer: A mileage log showing business and personal miles

The IRS requires contemporaneous mileage records showing business and personal miles to substantiate the business-use percentage for vehicle deductions.