Are You Leaving the Qualified Business Income (QBI) Deduction on the Table?

The qualified business income deduction lets eligible pass-through owners deduct up to 20 percent of their business income, and the 2025 tax law made it a permanent part of the tax code. It sounds automatic. In practice, the rules that decide how much you get are involved enough that a lot of owners either skip the deduction or claim less than they are owed.

The gap is real money. On a business with $100,000 of qualified income, a full deduction takes $20,000 off your taxable income. A calculation that misses a step can leave a chunk of that behind, year after year, with nothing on the return to flag it.

Find out what your return missed.

Get your QBI deduction checked.

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Where the deduction gets left behind

You may be wrong about whether you qualify. The Section 199A deduction is for pass-through businesses: sole proprietorships, partnerships, S corporations, and LLCs. C corporations do not get it, and income you earn as a W-2 employee does not either. Some owners assume they earn too little to bother, when starting in 2026 anyone with at least $1,000 of qualified business income gets a minimum $400 deduction. Others assume they automatically qualify and never check the limits that follow, which is often tied to the structure they operate under.

Your income level can quietly shrink it. Below a taxable income threshold, the deduction is a clean 20 percent on Form 8995, one page, seventeen lines. For 2026 that threshold is $201,750 for single filers and $403,500 for joint filers. Once you cross it, the deduction moves to the longer Form 8995-A and gets capped by a wage-and-property test. The deduction cannot exceed the greater of 50 percent of the W-2 wages your business paid, or 25 percent of those wages plus 2.5 percent of the cost of your qualified property. Most owners have never run that test, so they take the software’s number and move on.

Service businesses can lose it completely. If you work in a specified service field, such as medicine, law, accounting, consulting, or financial services, the deduction phases out faster and disappears above the income ceiling. The 2025 law widened the phase-out range, which gives some service owners more room than before and makes the planning around that range worth more. For the medical practices, brokers, and professionals we work with, this is the rule that most often costs the deduction.

Your own salary sets part of the limit. If you run an S corporation, the salary you pay yourself is a W-2 wage, and W-2 wages feed the cap described above. Set your salary too low and you shrink the wage base that supports the deduction. Set it too high and you give up the payroll-tax advantage that made the S election worth it in the first place. The right salary for an S-corp owner depends on your income, your entity, and the year’s thresholds, so it belongs in a planning conversation.

Your tax software runs the numbers you already gave it

Software fills in Form 8995 or 8995-A from figures that are already set by the time you file. It does not go back and ask whether a different salary, a different entity election, or the timing of a large purchase would have produced a bigger deduction. By April, those decisions are closed. The deduction you claim is mostly the result of choices you made during the year, through your entity structure, your salary, and when income and expenses landed. The owners who capture the full amount tend to be the ones who looked at it before year-end.

Up to 20% is on the line.

Make sure you’re claiming all of it.

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Getting a second set of eyes on it

The thresholds move every year, the service-business rules carry their own math, and the S-corp salary question ties into decisions well beyond the deduction itself. An enrolled agent is federally licensed to represent you before the IRS and can look at whether your return is claiming the full deduction or leaving part of it on the table.

That year-round view is what our proactive accounting and tax services are built around, for business owners across Coral Springs and South Florida.

If no one has checked whether you are claiming the full qualified business income deduction, that is a short conversation worth having. Schedule a call and we will take a look.

Recommended FAQ schema entries

Is the QBI deduction still available in 2026? Yes. The qualified business income deduction was set to expire after 2025, but the 2025 tax law made it permanent, so it applies for 2026 and beyond.

Who qualifies for the QBI deduction? Owners of pass-through businesses, including sole proprietorships, partnerships, S corporations, and LLCs, with qualified business income. C corporations and W-2 employees do not qualify.

How much is the QBI deduction? Up to 20 percent of your qualified business income. Above certain income thresholds, wage and property limits can reduce the amount.

What is the income limit for the QBI deduction in 2026? For 2026, the threshold is $201,750 for single filers and $403,500 for joint filers. Below it the calculation is simple, and above it additional limits apply.

Do S corporation owners get the QBI deduction? Yes. For S corporation owners above the income threshold, the salary you pay yourself counts as W-2 wages, which factor into the limit on the deduction.

Can service businesses claim the QBI deduction? Sometimes. Specified service businesses like medical, legal, accounting, and consulting firms face a faster phase-out and can lose the deduction above the income ceiling.