Do I qualify for the QBI deduction?

If you own a pass-through business (sole proprietorship, partnership, S-corp, or LLC taxed as one) with positive qualified business income, you generally qualify. Below the income thresholds, the deduction is simply 20% of QBI with very few restrictions.

Is the QBI deduction still available after 2025?

Yes. The One Big Beautiful Bill Act made the Section 199A QBI deduction permanent. The scheduled expiration after 2025 no longer applies; the deduction continues, with the thresholds indexed for inflation.

Why did my QBI deduction get reduced or eliminated?

The usual reason is taxable income above the threshold combined with a specified service business (SSTB), which phases the deduction out entirely above the upper limit. Non-service businesses above the threshold are capped by W-2 wages paid and qualified property.

How does the QBI deduction interact with an S-corp salary?

An S-corp owner's reasonable W-2 salary is not QBI, so paying yourself a higher salary lowers the QBI base and shrinks the 20% deduction. But above the income thresholds, W-2 wages the business pays are exactly what unlocks the wage-limitation cap. The salary that is 'too low' for QBI purposes below the threshold can be the salary that preserves the deduction above it — which is why the split has to be modeled, not guessed.

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Tax Planning & Strategy

The QBI Deduction: How Pass-Through Businesses Get a 20% Tax Break

The Qualified Business Income deduction lets pass-through owners deduct up to 20% of business income from federal taxable income. It's one of the most valuable — and most misunderstood — provisions in small business tax.

SMAART Tax Team

March 30, 2026

6 min read

|Reviewed by Ray Dominguez, EA, USTCP