Who qualifies for the QBI deduction?

Owners of pass-through businesses — sole proprietorships, single-member LLCs, partnerships, and S-Corporations, plus some trusts and estates — can qualify, along with holders of qualified REIT dividends and publicly traded partnership income. C-Corporations do not qualify, and ordinary W-2 wage income is not qualified business income. You take the deduction whether you itemize or claim the standard deduction. Below the income thresholds anyone with qualifying business profit gets it; above them, wage and service-business tests decide how much survives.

How much is the QBI deduction?

The deduction is up to 20% of your qualified business income. It is then capped at 20% of your taxable income minus net capital gain, so it can never exceed a fifth of your income after the business deduction is set aside. For an owner under the income thresholds the calculation is straightforward — 20% of business profit — while above the thresholds the wage/property limit or the service-business phase-out can reduce it below the full 20%.

What are the 2026 income limits for the QBI deduction?

For tax year 2026, per IRS Rev. Proc. 2025-32, the taxable-income threshold is $201,750 for single filers and $403,500 for married filing jointly (with $201,775 for married filing separately). At or below that threshold you get the full 20% with no further tests. The extra limits phase in over the next $75,000 of income for single filers and $150,000 for joint filers, so they apply in full above $276,750 single and $553,500 joint. These figures are inflation-adjusted each year.

What is a specified service trade or business (SSTB)?

An SSTB is a business the tax code singles out — health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, and investing or investment management, plus any business whose principal asset is the reputation or skill of its owners. Above the top of the income phase-in range, an SSTB gets no QBI deduction at all; inside the range it phases out. Below the income threshold, the SSTB label does not matter and the owner gets the full 20%. Architecture and engineering were deliberately excluded from the list.

How does my S-Corp salary affect my QBI deduction?

The W-2 salary you pay yourself from an S-Corp is not qualified business income, so a higher salary lowers the profit eligible for the 20% deduction. Below the income thresholds that argues for a lower reasonable salary. Above the thresholds it can reverse: because the deduction is then capped at 50% of W-2 wages (or 25% of wages plus 2.5% of property), a higher salary raises that ceiling and can rescue a deduction a rock-bottom salary would forfeit. The salary and the QBI deduction have to be optimized together.

Did the One Big Beautiful Bill change the QBI deduction?

Yes. The 2025 tax law made the Section 199A deduction permanent — it had been scheduled to expire after 2025. Effective for tax years beginning in 2026 it also widened the phase-in range (to $75,000 for single filers and $150,000 for joint filers, up from $50,000 and $100,000), which softens the limits for owners just over the threshold, and it added a minimum deduction of $400 for a taxpayer with at least $1,000 of qualified business income from an active business, indexed for inflation after 2026.

The QBI Deduction: A Florida Business Owner's Guide

The QBI Deduction: How the 20% Pass-Through Break WorksBy Timothy LeGendre, CPA · Florida License #AC62625 · Last reviewed 2026-07-02A Florida CPA's guide to the Section 199A QBI deduction — how the 20% pass-through deduction works, the 2026 income limits, and the wage rule.The Section 199A qualified business income (QBI) deduction lets most pass-through owners deduct up to 20% of their business profit before federal income tax. It applies to sole proprietors, partnerships, and S-Corporations, is available whether or not you itemize, and reduces income tax only — never self-employment tax. For tax year 2026 the taxable-income thresholds (IRS Rev. Proc. 2025-32) are $201,750 for single filers and $403,500 for married filing jointly; at or below them you take the full 20% with no further tests. Above the thresholds a non-service business is capped at the greater of 50% of W-2 wages or 25% of wages plus 2.5% of property cost, and a specified service business (health, law, accounting, consulting, financial services and similar) phases out to nothing by $276,750 single or $553,500 joint. Reasonable compensation paid from an S-Corp is excluded from QBI, so the owner salary and the deduction must be optimized together. The 2025 One Big Beautiful Bill Act made the deduction permanent, widened the 2026 phase-in ranges, and added a $400 minimum for at least $1,000 of active QBI. In Florida, with no state income tax, it is a purely federal break.

Frequently asked questions

Who qualifies for the QBI deduction?: Owners of pass-through businesses — sole proprietorships, single-member LLCs, partnerships, and S-Corporations, plus some trusts and estates — can qualify, along with holders of qualified REIT dividends and publicly traded partnership income. C-Corporations do not qualify, and ordinary W-2 wage income is not qualified business income. You take the deduction whether you itemize or claim the standard deduction. Below the income thresholds anyone with qualifying business profit gets it; above them, wage and service-business tests decide how much survives.
How much is the QBI deduction?: The deduction is up to 20% of your qualified business income. It is then capped at 20% of your taxable income minus net capital gain, so it can never exceed a fifth of your income after the business deduction is set aside. For an owner under the income thresholds the calculation is straightforward — 20% of business profit — while above the thresholds the wage/property limit or the service-business phase-out can reduce it below the full 20%.
What are the 2026 income limits for the QBI deduction?: For tax year 2026, per IRS Rev. Proc. 2025-32, the taxable-income threshold is $201,750 for single filers and $403,500 for married filing jointly (with $201,775 for married filing separately). At or below that threshold you get the full 20% with no further tests. The extra limits phase in over the next $75,000 of income for single filers and $150,000 for joint filers, so they apply in full above $276,750 single and $553,500 joint. These figures are inflation-adjusted each year.
What is a specified service trade or business (SSTB)?: An SSTB is a business the tax code singles out — health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, and investing or investment management, plus any business whose principal asset is the reputation or skill of its owners. Above the top of the income phase-in range, an SSTB gets no QBI deduction at all; inside the range it phases out. Below the income threshold, the SSTB label does not matter and the owner gets the full 20%. Architecture and engineering were deliberately excluded from the list.
How does my S-Corp salary affect my QBI deduction?: The W-2 salary you pay yourself from an S-Corp is not qualified business income, so a higher salary lowers the profit eligible for the 20% deduction. Below the income thresholds that argues for a lower reasonable salary. Above the thresholds it can reverse: because the deduction is then capped at 50% of W-2 wages (or 25% of wages plus 2.5% of property), a higher salary raises that ceiling and can rescue a deduction a rock-bottom salary would forfeit. The salary and the QBI deduction have to be optimized together.
Did the One Big Beautiful Bill change the QBI deduction?: Yes. The 2025 tax law made the Section 199A deduction permanent — it had been scheduled to expire after 2025. Effective for tax years beginning in 2026 it also widened the phase-in range (to $75,000 for single filers and $150,000 for joint filers, up from $50,000 and $100,000), which softens the limits for owners just over the threshold, and it added a minimum deduction of $400 for a taxpayer with at least $1,000 of qualified business income from an active business, indexed for inflation after 2026.