Intuit Academy Tax Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The Qualified Business Income (QBI) deduction allows eligible taxpayers to deduct up to 20% of their qualified business income from pass-through entities, including sole proprietorships, partnerships, S corporations, or certain trusts and estates. To determine the amount of income subject to this deduction, various factors come into play, such as the type of business, total income level, and any applicable limitations based on wages paid or capital invested.

In the case of Renaldo, if he has calculated based on his qualified business income and the relevant limits, $5,541 represents the amount that falls within the QBI deduction guidelines. This means that, after applying the necessary percentage and accounting for any phase-outs or limitations relevant to Renaldo's income level, the remaining amount eligible for the QBI deduction correctly sums up to $5,541. This figure indicates that Renaldo's income falls within the thresholds that allow him to maximize the benefits of the deduction, thus optimizing his tax liability.

This amount reflects both the federal tax rules in effect and the calculations applied based on his specific business income and situation. Understanding how to apply the QBI deduction effectively is crucial for maximizing potential tax savings in the context of self-employment or pass-through entity income.