One of the biggest tax breaks for business owners was about to disappear. Now it’s here to stay,
and that’s worth a deep breath of relief.
For years, the qualified business income deduction came with an expiration date hanging over it.
A lot of the owners we work with were quietly bracing for it to vanish at the end of 2025.
That worry is gone now, and it changes how you can plan.
Let’s break down what happened and what you can do about it.
What Is the QBI Deduction, and Why Should I Care?
The QBI deduction lets eligible business owners deduct up to 20% of their qualified business
income right on their personal tax return. QBI is simply short for qualified business income —
the profit your business makes from its everyday work. If you qualify, the deduction can reduce
your taxable income, subject to limits based on taxable income, wages, and other rules.
It was created back in the 2017 Tax Cuts and Jobs Act to give smaller businesses a fairer shake
next to big corporations. We’re talking about sole proprietors, partnerships, S corporations, and
most LLCs.
If you’ve ever felt like the tax code was written for someone bigger than you, this is one of the
rare breaks built with your kind of business in mind.
Wasn’t This Tax Break About to Disappear?
It was, and that worry was completely reasonable. The deduction was scheduled to expire at the
end of 2025, which left a lot of owners unsure how to plan past that date. Then the One Big
Beautiful Bill Act, signed into law in July 2025, made it permanent.
That single word — permanent — is a big deal. You’re no longer planning around a cliff that
drops off at the end of the year. The deduction is a steady part of the tax code now, so the
strategy you build this year can hold up for years.
If you’d been putting off long-term planning because you didn’t know whether this benefit would
survive, that hesitation is off the table in the best possible way.
How Much Money Are We Actually Talking About?
Enough to change your year. This is a real reduction in what you owe, not a small footnote on
your return. The bigger your qualified income, the bigger the potential break.
Here’s a simple example. Say your business has $300,000 of qualified business income and
you’re otherwise eligible for the full deduction: a 20% QBI deduction would be $60,000, which
could reduce federal tax by about $18,000 at a 30% marginal rate, before any other limitations.
Without QBI, you’d owe tax on the full $300,000 — no break, no buffer
That’s $18,000 staying in your business instead of leaving it. (This is a simplified example; your
actual number depends on the details below.) For a lot of owners, $18,000 is a hire, a piece of
equipment, or a cushion that finally helps them sleep at night.
Do I Even Qualify for This Deduction?
Many business owners do, and it’s worth checking rather than assuming you don’t. The deduction
is built for pass-through businesses — sole proprietorships, partnerships, S corporations, and
LLCs taxed as one of those. C corporations don’t qualify, because they’re taxed separately from
their owners.
Your income level matters too. Below certain thresholds, qualifying is fairly simple. Above
them, the rules tighten, especially for what the IRS calls specified service businesses — fields
like law, health, accounting, and consulting.
Here’s some good news. Starting in 2026, the phase-in ranges are wider, and taxpayers with at
least $1,000 of qualified business income from an active trade or business may be eligible for a
$400 minimum deduction, subject to inflation indexing after 2026.
Why Do W-2 Wages and My Entity Type Keep Coming Up?
Because once your income climbs past those thresholds, the size of your deduction starts
depending on how your business is built. Two things carry real weight: the W-2 wages your
business pays and the way your business is structured.
For higher earners, part of the deduction can be tied to wages paid to employees, including a
reasonable wage an S corporation owner pays themselves. And your entity type — sole
proprietor, partnership, or S corporation — can change how the final math lands.
This is where small choices add up:
The wages you run through payroll
Whether an S corporation election makes sense for you
How and when you take income out of the business
None of this is meant to feel overwhelming. It’s simply the spot where a little planning turns into
real savings.
What Should I Do Now That It’s Here to Stay?
Plan early, and don’t leave this one to chance. Because the deduction is permanent, the moves
you make now can pay off year after year. The owners who benefit most are usually the ones
who set things up before tax season, not the week the return is due.
A few steps worth taking:
Review your entity structure to see if it still fits your income.
Look at how your wages and distributions are set up.
Keep clean books so your qualified income is easy to pin down.
The IRS keeps a plain-language overview on its qualified business income deduction page if
you’d like to read the basics yourself. And when the details start to feel like a lot, that’s exactly
when a conversation helps.
How Can We Help You Make the Most of This Deduction?
This is the kind of work we genuinely enjoy doing right alongside you. At J.R. Martin &
Associates, we help business owners figure out whether they qualify for the QBI deduction,
structure their business to protect it, and plan ahead so they’re not leaving money on the table.
You don’t have to untangle wage rules and entity choices on your own. Whether you need
comprehensive tax planning, strategic tax advice, dependable bookkeeping, or business
consulting that ties it all together, we’re here to help you feel confident about your numbers.
If you’d like to know what this permanent deduction could mean for your bottom line, let’s sit
down together. Reach out for a friendly, pressure-free review, and we’ll help you make the most
of a tax break that’s finally here to stay.