What is the QBI deduction and do I still get it?

The QBI deduction is still available. Congress made it permanent in 2025 after it was originally scheduled to expire at the end of that year.

The deduction allows owners of pass-through businesses to deduct up to 20 percent of their qualified business income from their taxable income. This applies to S corporations, partnerships, LLCs taxed as partnerships or S corporations, and sole proprietorships. If you run your business through one of these structures and report the income on your personal return, you may qualify.

The math is straightforward at lower income levels. If your pass-through business earns $100,000 in qualified income, you can potentially deduct $20,000 from your taxable income. At a 24 percent marginal bracket, that represents roughly $4,800 in tax savings on that example alone. Actual savings vary based on your full tax picture.

Income limits change things. Under current law, the thresholds are approximately $200,000 for single filers and $400,000 for married filing jointly. These figures adjust for inflation each year, so verify the exact numbers for the current tax year when you file. Below these thresholds, most pass-through owners can claim the full deduction without additional limitations.

Above the thresholds, service businesses face restrictions. The tax code identifies certain professions as specified service trades or businesses. This includes law, consulting and professional firms, medicine, accounting, and similar fields where the owner’s personal skill drives the business. Once your income exceeds the threshold, the deduction phases out over a defined range until it disappears entirely at higher income levels.

Non-service businesses have different rules above the threshold. Their deduction becomes subject to limitations based on W-2 wages paid and depreciable property held by the business, but it does not phase out entirely the way it does for service businesses.

Planning can preserve the deduction for high earners. If you’re approaching or exceeding the income thresholds, there are legitimate strategies to manage your taxable income and keep more of the QBI deduction. Retirement plan contributions reduce taxable income and can keep you below the phaseout range. Entity structure decisions affect how income flows to your return. The timing of certain deductions matters too.

This is where year-round tax planning pays for itself. A preparer can file your return accurately, but the deduction decisions happen during the tax year, not at filing time. By the time you sit down to file, your income is what it is and the deduction is either available or it is not. Our CPA firm in Pelham works with clients across the country on exactly this kind of planning.

If you’re running a pass-through business and haven’t had someone walk you through the QBI calculation for your situation, it’s worth a conversation. Reach out to schedule a consultation.