The QBI Deduction (Section 199A), Explained
The qualified business income deduction can knock up to 20 percent off the profit from your business before tax, and a 2025 law made it permanent. Here is who qualifies, the income thresholds for 2026, and the rules for service businesses.
The qualified business income deduction is one of the most valuable breaks a small business owner gets, and for a while it looked like it was about to expire. It is not. A 2025 law made it permanent, so it is worth understanding for the long haul. At its best it lets you deduct up to 20 percent of your business profit before tax, on top of your regular business deductions.
What it is
Often called QBI or the Section 199A deduction, it gives owners of pass-through businesses, sole proprietors, partnerships, and S-corporations, a deduction of up to 20 percent of their qualified business income. It is taken after your business expenses, it does not require you to itemize, and importantly it does not reduce your self-employment tax. It only lowers your income tax.
It is permanent now
The deduction was originally set to sunset after 2025. The One Big Beautiful Bill Act, signed in 2025, removed that expiration, so QBI continues for tax years after 2025 with no end date. The same law also added a small minimum deduction for owners with at least 1,000 dollars of qualified business income who materially participate, a floor of a few hundred dollars even for very small operations.
The income thresholds
Below a certain taxable income, the deduction is simple: you get the full 20 percent no matter what kind of business you run. For 2026 those thresholds are 201,750 dollars if you are single and 403,500 dollars if you are married filing jointly. These rise with inflation each year. Stay under them and the complicated rules below mostly do not apply to you.
Above the thresholds, it gets technical
Once your income climbs past those lines, two things kick in. First, your deduction can be limited by how much you pay in W-2 wages and how much business property you own. Second, certain service businesses, health, law, accounting, consulting, financial services, and similar fields, start to lose the deduction and it disappears entirely at the top of the range. Fields like engineering, architecture, and real estate are not treated as service businesses for this rule.
A note for landlords
Rental income can qualify for QBI if your rental activity rises to the level of a trade or business, or if you meet a safe harbor of 250 hours of rental work a year with proper records. If you own rentals, it is worth checking, since it can add a meaningful deduction. Our guide to rental property deductions covers the rest of the picture.
Know your real business income
QBI starts with a clean profit number. Vuuv keeps your income and expenses organized so the figure your deduction is built on is accurate, not a year-end guess.
Start freeHow Vuuv helps
The QBI deduction is calculated off your business profit, so it is only as reliable as your books. Vuuv keeps your Schedule C income and expenses current all year, which means the profit figure that drives your deduction is solid. If you are weighing how your business is structured, our guide to sole proprietor versus LLC versus S-corp pairs naturally with this one.
Frequently asked questions
Is the QBI deduction still around after 2025?
Yes. The qualified business income deduction was scheduled to expire after 2025, but the One Big Beautiful Bill Act made it permanent for tax years starting after 2025, so it is not going away.
What is the income limit for the full QBI deduction?
For 2026 you get the full 20 percent regardless of what kind of business you run if your taxable income is under 201,750 dollars single or 403,500 dollars married filing jointly. Above those amounts the rules tighten. The thresholds rise with inflation each year.
Can doctors, lawyers, and consultants take the QBI deduction?
Yes, but only up to the income thresholds. These are specified service businesses, and once your income climbs above the phase-out range the deduction disappears entirely for them. Below the thresholds they qualify like anyone else.
Does the QBI deduction lower my self-employment tax?
No. It only reduces your taxable income for income tax. Your self-employment tax is still figured on your full net profit, so QBI does not touch that 15.3 percent.
Do rental properties qualify for QBI?
They can, if the rental rises to the level of a trade or business or you meet the 250-hours-a-year rental safe harbor with proper records. Many landlords qualify, but it is worth confirming with a tax pro.
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This article is general information, not tax advice. Tax rules change and every situation is different. Confirm the details against current IRS guidance or talk to a qualified tax professional before you file.