Yes. Eligible owners of pass-through businesses may qualify for the Qualified Business Income (QBI) Deduction, also known as the Section 199A Deduction. This deduction may allow eligible taxpayers to deduct up to 20% of qualified business income on their federal income tax return.
The QBI deduction applies to many:
- Sole proprietorships
- Partnerships
- S Corporations
- Limited Liability Companies (LLCs) taxed as pass-through entities
The One Big Beautiful Bill Act (OBBBA) made the QBI deduction permanent beginning in 2026.
What Is Qualified Business Income?
Generally, Qualified Business Income (QBI) is the net amount of income, gain, deduction, and loss from a qualified U.S. trade or business. Certain types of income are excluded.
QBI generally does not include:
- Capital gains or capital losses
- Dividend income
- Interest income not properly allocable to the business
- Annuity income unrelated to the business
- Foreign currency gains or losses
- Reasonable compensation paid to S Corporation shareholder-employees
- Guaranteed payments paid to partners or LLC members for services rendered
Income Limitations
For Tax Year 2026, the full QBI deduction is generally available to taxpayers whose taxable income is at or below:
- $201,750 for Single filers
- $403,500 for Married Filing Jointly filers
Above these thresholds, additional rules may limit the deduction based on:
- W-2 wages paid by the business
- Qualified business property
- Whether the business is a Specified Service Trade or Business (SSTB)
Specified Service Trades or Businesses (SSTBs)
Special rules apply to Specified Service Trades or Businesses.
Examples include:
- Health services (physicians, dentists, surgeons, etc.)
- Law practices
- Accounting firms
- Actuarial services
- Financial services
- Consulting businesses
- Performing arts
- Brokerage services
- Athletics and athletic services
For taxpayers with income above the applicable threshold, the QBI deduction may be reduced or eliminated depending on income level and the phase-in calculations.
New Minimum Deduction
Beginning in Tax Year 2026, taxpayers who:
- Have at least $1,000 of qualified business income from an active trade or business, and
- Meet the applicable participation requirements
may qualify for a minimum $400 QBI deduction, even if other limitations would otherwise reduce the deduction.
Additional Information
The QBI deduction is calculated automatically by the program when all required business income information is entered.
Depending on income level and business type, additional calculations may be required to determine the allowable deduction. Taxpayers with income above the applicable thresholds may be subject to wage, property, and SSTB limitations