What's the Difference Between the QBI Deduction and a Regular Business Expense?

The qualified business income (QBI) deduction is a special tax break for self-employed people and small business owners that works very differently from a standard business expense deduction. A regular business expense is something you actually spend money on — like supplies, software, or office rent — and you deduct it from your business income to arrive at your net profit. The QBI deduction, created by the 2017 Tax Cuts and Jobs Act, allows eligible business owners to deduct up to 20% of their qualified business income from their personal taxable income, in addition to any regular business deductions. You don't have to spend anything to get the QBI deduction — it's simply calculated as a percentage of your net business income. However, there are income limits and restrictions for certain service businesses, so not everyone with self-employment income qualifies for the full 20%.