For years, small business owners have been holding their breath. The 20% Qualified Business Income deduction — one of the most valuable tax benefits available to pass-through entities — was set to expire at the end of 2025. That meant LLCs, S-corps, partnerships, and sole proprietors faced the very real possibility of a significant tax increase heading into 2026.
Then the One Big Beautiful Bill Act happened. And with it, the QBI deduction became a permanent fixture of the tax code.
If you run a small business and file as a pass-through entity, this is one of the most important tax developments in nearly a decade. Let’s break down what changed, what it means for your bottom line, and what you can do about it right now.
What Is the QBI Deduction, and Why Does It Matter?
The QBI deduction allows eligible business owners to deduct up to 20% of their qualified business income from their taxable income. In plain English: if your business earns $200,000 in qualified income, you could knock $40,000 off your taxable income before calculating what you owe the IRS.
Originally introduced under the 2017 Tax Cuts and Jobs Act, this deduction was always scheduled to sunset. Business owners could use it, but they couldn’t rely on it as a permanent planning tool. That created uncertainty — especially for owners making long-term decisions about entity structure, compensation strategy, and reinvestment.
Now that uncertainty is gone. The OBBBA made the QBI deduction permanent, which means you can build it into your tax strategy for the long haul.
What Changed Under the OBBBA?
Beyond making the deduction permanent, the OBBBA expanded the income thresholds at which the deduction begins to phase out. Starting in 2026, those thresholds have been raised and widened — meaning more business owners now qualify for the full deduction, and those in specified service trades (think medical practices, consultants, and certain professional services) have a bigger window before their deduction starts shrinking.
There’s also a new minimum deduction floor. If you have at least $1,000 in qualified business income, you’re guaranteed a minimum deduction of $400 — even if your income would otherwise push you past the phase-out entirely.
For the full list of OBBBA provisions, the IRS maintains an updated summary at irs.gov/newsroom/one-big-beautiful-bill-provisions.
Who Benefits Most?
The short answer: any pass-through business owner who isn’t already at the very top of the income scale. But there are a few groups that stand to gain the most.
HVAC contractors, plumbers, and trades businesses operating as S-corps or LLCs are often right in the sweet spot for the full deduction. The same goes for construction contractors, farm and ranch operators filing through partnerships, and dental or medical practice owners — especially those who were previously limited by the specified service trade restrictions.
With the expanded thresholds, many practice owners and professionals who were previously phased out will now qualify for a larger deduction than they’ve received in years.
DIY: A Quick QBI Self-Check You Can Do Today
| ✅ YOUR 5-MINUTE QBI SELF-CHECK 1. Pull up your most recent tax return (or your CPA’s summary) and find your Schedule C, K-1, or S-corp return. 2. Locate your net business income (after expenses, before owner compensation on an S-corp). 3. Multiply that number by 0.20. That’s your maximum potential QBI deduction. 4. Compare that number to what was actually claimed on your return (Form 8995 or 8995-A). 5. If the deduction on your return is significantly lower than 20% of your net income — or if it’s missing entirely — ask your CPA why. It could be a phase-out issue, an entity structure issue, or a bookkeeping issue that’s suppressing your qualified income. |
This isn’t a substitute for professional tax advice, but it takes five minutes and can reveal thousands of dollars in missed deductions. The IRS provides a detailed breakdown of QBI calculation rules in the instructions for Form 8995 and Form 8995-A, both available at irs.gov.
The Bottom Line
The QBI deduction going permanent is a genuine win for small business owners. It provides predictability, encourages long-term planning, and puts real money back into the pockets of the people building businesses from the ground up.
But it’s not automatic. You have to earn the deduction by keeping your financial house in order. That means monthly bookkeeping, proper entity structure, and ideally, a financial partner who understands how your specific industry works.
At BKKPRS, we keep your books tax-ready year-round so when deductions like this hit, you’re already positioned to take full advantage. If you’re not sure whether your current setup is capturing everything you’re entitled to, let’s have a conversation.
