N※N

QBI Deduction: A Tax Savings Opportunity in 2026

  //business-finance.news-articles.net/content/202 .. deduction-a-tax-savings-opportunity-in-2026.html
  Published in Business and Finance on Tuesday, January 27th 2026 at 18:32 GMT by Investopedia
      Locales:

Tax Owners, Take Note: The QBI Deduction - A Significant Savings Opportunity in 2026

Tuesday, January 27th, 2026 - As business owners navigate the complexities of the 2026 tax season, a vital provision from the 2017 Tax Cuts and Jobs Act (TCJA) is garnering renewed attention: the Qualified Business Income (QBI) deduction. This seemingly complex tax law offers potentially substantial savings for eligible small and medium-sized businesses, and understanding its nuances is paramount for maximizing your tax return.

At its core, the QBI deduction allows business owners - operating as sole proprietorships, partnerships, LLCs, or S corporations - to deduct up to 50% of their QBI from their taxable income. This represents a considerable shift from traditional business income calculations, which typically focus solely on net profit.

What Exactly is QBI?

Simply put, QBI is the income generated by your business after you've accounted for all ordinary and necessary business expenses. It's a broader definition of income than just "net profit," encompassing items that might not traditionally be considered part of a business's bottom line. For instance, this can include expenses related to office space, equipment, and even a portion of owner compensation - depending on the structure of your business.

Who's Eligible? A Targeted Deduction

The QBI deduction isn't available to all businesses. It's primarily designed for those operating under structures like sole proprietorships, partnerships, LLCs, and S corporations. Crucially, C corporations are excluded from benefiting from this deduction. Additionally, your business must qualify as a U.S. trade or business to be eligible - meaning it must be engaged in activities that are inherently business-related.

Deduction Limits: A Tiered Approach

The potential deduction is significant - up to 50% of your QBI - but it's subject to income limitations. The deduction is capped at $31,000 for single filers and $62,000 for married couples filing jointly. These limits apply before any phasing-out occurs. The IRS has implemented a tiered system, reducing the deduction as your income rises.

Income Limitations and Phase-Outs: A Closer Look

The income thresholds for the QBI deduction are as follows:

• Single Filers:
  • Full Deduction: Income up to $182,100
  • Partial Deduction: Income between $182,100 and $231,250
  • No Deduction: Income above $231,250
• Married Filing Jointly:
  • Full Deduction: Income up to $364,200
  • Partial Deduction: Income between $364,200 and $462,500
  • No Deduction: Income above $462,500

SSTBs: Increased Scrutiny

Certain business types, referred to as Specified Service Trades or Businesses (SSTBs), face stricter limitations. These typically include professions like doctors, lawyers, accountants, consultants, and other similar services. The IRS has imposed stricter rules on these businesses, often limiting the amount of QBI they can deduct.

Recent IRS Clarifications: Keeping Up with the Rules

The IRS has issued a series of clarifications over the past few years to refine the application of the QBI deduction. These have focused on critical areas such as determining QBI for businesses with multiple owners and handling business losses within the framework of the deduction. It's important to stay informed about these ongoing revisions.

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Consult with a qualified tax professional to determine your eligibility and the specific implications of the QBI deduction for your business.

[ IRS QBI Deduction Page ] (Example Link - Replace with actual IRS link)

[ Small Business Administration QBI Information ] (Example Link - Replace with actual SBA link)