Is the QBI Deduction Still Available in 2026?
For owners of pass-through businesses, the Qualified Business Income (QBI) deduction can provide meaningful tax savings. The deduction remains available in 2026 but determining how much you can claim depends on your income, business structure, and other tax factors.
Here’s what business owners should know as they plan for the end of the year.
What Is the QBI Deduction?
The QBI deduction, also known as the Section 199A deduction, generally allows eligible owners of pass-through businesses to deduct up to 20% of qualified business income from their taxable income.
It may apply to owners of sole proprietorships, partnerships, S corporations, and certain LLCs. Unlike a business expense, the deduction is generally claimed on the owner's individual tax return.
Who Qualifies?
Eligibility is not as simple as owning a pass-through business. The amount of the deduction can depend on several factors, including:
Total taxable income
Type of business
W-2 wages paid by the business
Qualified business property
Ownership structure
Amount of income that qualifies as QBI
Higher-income business owners may face additional limitations, particularly if they operate a specified service trade or business (SSTB), such as accounting, consulting, law, health, financial services, or certain other professional services.
S corporation owners also have another consideration: W-2 wages paid to an owner generally are not treated as QBI. The remaining qualifying business income may be eligible for the deduction, subject to applicable limitations.
Why Planning for the End of the Year Matters
Because the QBI deduction depends on your broader tax situation, waiting until tax filing season can reduce your planning options.
Before the end of the year, business owners should review projected business and taxable income, compensation, retirement contributions, capital purchases, capital gains, and other deductions. Your business structure may also affect your overall tax strategy.
A year-end tax projection can help you determine where you stand and identify potential planning opportunities while there is still time to act.
What Business Owners Should Do Now
If you own a pass-through business, don't assume you will automatically receive the full 20% deduction. Consider reviewing your business structure, projected taxable income, and tax strategy before the end of the year with your tax advisor.
For S corporation owners, this is also a good time to review reasonable compensation and consider how wages and business income affect your overall tax picture.
The Bottom Line
The QBI deduction can remain a valuable tax-planning opportunity in 2026, but the rules are not one-size-fits-all. Your income level, business type, compensation, and other factors can affect the deduction available to you.
Instead of waiting until filing season, consider a tax planning review before the end of the year. Understanding how QBI fits into your broader tax strategy can help you make more informed business and financial decisions before the end of the year.
