QBI Deduction — Common Questions
Is the QBI deduction permanent in 2026?
Yes. The QBI deduction is permanent under OBBBA. The Tax Cuts and Jobs Act (TCJA) set it to expire after 2025. The One Big Beautiful Bill Act (OBBBA) eliminated that sunset and also raised the rate from 20% to 23%. There is no expiration date — the 23% deduction applies to 2026 and all future tax years. Many websites still have outdated "expires in 2025" language. That information is wrong.
What is the QBI deduction rate in 2026?
23% of qualified business income — up from 20% under the original TCJA. OBBBA raised the rate. On $100,000 of net QBI, your deduction is $23,000 (not the old $20,000). In the 22% tax bracket, that $23,000 deduction saves $5,060 in federal income tax annually — or $1,265 per quarter. The calculator above uses the correct 23% OBBBA rate.
What are the 2026 QBI phase-out thresholds?
The 2026 phase-out thresholds are $197,300 (Single/MFS/HOH) and $394,600 (Married Filing Jointly). These are taxable income thresholds — not gross income. Below these thresholds, all qualifying pass-through businesses (SSTB or not) get the full 23% deduction. Above these thresholds: SSTBs face a phase-out that completes $50K above the single threshold ($247,300) or $100K above MFJ ($494,600). Non-SSTBs face a W-2 wage limitation instead. Note: the old 2025 TCJA thresholds ($203,050/$406,100) no longer apply in 2026.
Who qualifies for the QBI deduction?
The QBI deduction is available to pass-through business owners: sole proprietors (Schedule C), partners in partnerships, S-Corp shareholders, and LLC members. C-corporations do not qualify — they have a flat 21% corporate rate and can't take the QBI deduction. The deduction is claimed at the individual tax return level, regardless of how your business is structured (as long as it passes through to your personal return).
What is an SSTB and does it affect my deduction?
A Specified Service Trade or Business (SSTB) is defined in IRC § 199A(d) as services in: law, accounting, health, consulting, financial services, brokerage, performing arts, athletics, or any business where the principal asset is the skill/reputation of employees or owners. Engineering and architecture are NOT SSTBs. SSTB status only matters if your taxable income exceeds the phase-out threshold. Below $197,300 (single) or $394,600 (MFJ), SSTBs and non-SSTBs both get the full 23% deduction.
What changed with OBBBA for QBI?
Three changes: (1) Permanent — eliminated the 2025 sunset. (2) Rate raised to 23% — up from 20% TCJA rate. (3) $400 minimum deduction — any taxpayer with at least $1 of QBI gets a minimum $400 deduction, regardless of income. The minimum ensures even part-time freelancers with small incomes benefit from some QBI deduction. Source: One Big Beautiful Bill Act (OBBBA), amending IRC § 199A.
How do I maximize my QBI deduction?
Four strategies: (1) Reduce taxable income below the threshold — maximize retirement contributions (SEP-IRA up to $69,000, Solo 401(k) up to $23,500 + 25% of compensation). This keeps you in the full-deduction zone. (2) Elect S-Corp — S-Corp salary is excluded from QBI, but S-Corp distributions still qualify. Reduces SE tax while maintaining QBI. (3) Track all business expenses — more deductions lower net QBI, but also lower your taxable income, which may keep you below the threshold for SSTB filers. (4) If non-SSTB above the threshold, consider hiring employees to increase W-2 wages, which raises the W-2 wage limitation cap.