Qualified Business Income (QBI) Deduction

Full explanation

The QBI deduction (Section 199A) allows owners of pass-through businesses — sole proprietorships, partnerships, S corporations, and some trusts — to deduct up to 20% of their qualified business income. For 2026, the deduction is available with no limitations if taxable income is below $197,300 (single) or $394,600 (married filing jointly). Above those thresholds, the deduction may be limited based on W-2 wages paid by the business or the unadjusted basis of qualified property. Specified service businesses (law, health, consulting, financial services) lose the deduction entirely above $247,300 single / $494,600 MFJ. The QBI deduction was extended through 2028 by the One Big Beautiful Bill Act.

Source: IRS Publication 535 — Section 199A Deduction