The Qualified Business Income (QBI) deduction has been a big win for many small business owners since it first showed up in 2018. In simple terms, it lets eligible business owners deduct up to 20% of their business income on their taxes. That’s a pretty powerful way to lower your tax bill.
And thanks to the new One, Big, Beautiful Bill Act (OBBBA), there are some important changes you’ll want to know about, especially because this deduction is now permanent. Before, it was set to expire in 2025.
Who can use the QBI deduction?
The deduction is designed for pass-through businesses, which means the business income flows through to your personal tax return. This includes:
If you own a C corporation, unfortunately, this deduction doesn’t apply.
Income limits you should know
The QBI deduction is generous, but there are income thresholds that affect how much you can claim.
For 2025, if your taxable income is above:
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$197,300 (single)
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$394,600 (married filing jointly)
…some limits begin to kick in. Once you hit:
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$247,300 (single)
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$494,600 (married filing jointly)
…the deduction rules change more dramatically.
At that point, the IRS looks at factors like how much you pay in wages to employees and how much qualified property (like equipment or real estate) your business owns.
And if you’re in a specified service business—like law, consulting, health, performing arts, or athletics—the deduction phases out completely once your income gets too high. (Good news: fields like engineering and architecture don’t fall into this category.)
What’s changing under the new law?
The OBBBA makes the QBI deduction a little more flexible and beneficial starting in 2026:
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Wider income ranges. The “phase-in” range (where limits start applying) will expand, giving some business owners more room to claim the deduction.
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A new minimum deduction. If you actively participate in your business and have at least $1,000 in qualified business income, you’ll automatically qualify for at least a $400 deduction (adjusted for inflation each year).
These changes may not sound flashy, but they could put real money back in your pocket.
What should you do next?
Tax planning isn’t one-size-fits-all, and the QBI deduction is a perfect example of that. Your income level, type of business, and even the timing of certain expenses can all affect what you qualify for.
That’s where your Padgett advisor comes in. We can help you:
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Figure out if you qualify for the QBI deduction
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Maximize your tax savings under the new law
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Adjust your tax strategy so you don’t leave money on the table
The bottom line: the QBI deduction is here to stay, and the changes could make it even more valuable for your business.
Reach out to us at Padgett if you’d like to talk through how this applies to your situation. We’re here to help!