Section 199A QBI Deduction
A federal deduction of up to 20% of Qualified Business Income for owners of pass-through entities and sole proprietorships.
Detailed Explanation
The QBI deduction reduces effective federal tax rates on pass-through business income. For 2025, the deduction begins to phase out for higher-income taxpayers, with full phaseout for Specified Service Trades or Businesses (SSTBs, including health, law, accounting, and consulting) above the income thresholds. The OBBBA permanently extended QBI beyond its original 2025 sunset. Computation involves W-2 wage and Unadjusted Basis Immediately after Acquisition (UBIA) limitations at higher income levels.
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Learn about Tax Planning & StrategyRelated Terms
Pass-Through Entity
A business entity that does not pay federal income tax at the entity level; instead, profits and losses pass through to owners who report them on their individual returns.
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
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