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Changes to QBI Affect 26mill Business Owners
The One Big Beautiful Bill Act, signed into law on 7/4/25, made the 20% QBI deduction for pass-through small businesses (sole props, S corps, partnerships) permanent. The permanent QBI deduction may favor pass-through entities over C-corporations for certain business owners. It also increased the phase-in range for these pass-through taxpayers.
This gives higher-earning business owners more room to qualify for at least a partial deduction:
- Single filers:
Old range: $50,000
New range: $75,000 - Married filing jointly:
Old range: $100,000
New range: $150,000
The expanded phase-in ranges mean that higher-income taxpayers will have access to more of the Section 199A deduction before it phases out completely. This significantly benefits pass-through business owners with higher incomes, as they can now claim larger portions of the QBI deduction at income levels where they previously would have seen the deduction reduced or eliminated.
In 2021, 25.9 million small businesses claimed this QBI deduction.
Which businesses are most impacted?
Specified Service Trades or Businesses (SSTBs) will benefit the most from these changes. Under prior law, SSTBs (professionals like lawyers, doctors, accountants, consultants, etc.) were subject to full phaseout of the QBI deduction at lower income thresholds, but the expanded phase-in range now allows for QBI deductions at higher income levels.
What does this mean for me?
Should I switch my tax status from a C-corp to an LLC?
It depends!! Every situation is different and requires a formal analysis of your business structure, income, and other deductions.
To learn more about the QBI deduction and other tips to help you and your business, click Book A Meeting.