QBI / Section 199A — the 20% Pass-Through Deduction
A 20% deduction on qualified business income for most pass-through owners — but it phases out at higher incomes for service businesses.
What it is
Section 199A lets owners of pass-through businesses (Sole Prop, LLC, S-Corp, partnership) deduct up to 20% of their Qualified Business Income on their personal return. It's a deduction, not a credit, but it's effectively free money if you qualify.
The catch — SSTB phase-out
If you're in a 'Specified Service Trade or Business' (SSTB) — law, medicine, accounting, consulting, financial services, performing arts, athletics — the deduction phases out between roughly $252,150–$302,150 single / $504,300–$604,300 MFJ (2026). Above the top of the range, SSTBs lose the deduction entirely. QBI was made permanent under OBBBA.
Levers that can rescue it
Above the phase-out, non-SSTB businesses are limited by W-2 wages paid and qualified property. Sometimes hiring more W-2 employees, restructuring as a holding company, or splitting an SSTB from a real-estate or operations entity can unlock the deduction.
Educational only — not tax, legal, or investment advice. Talk through your specific situation with a qualified advisor.