Qualified Business Income (QBI) Deduction

What is the qualified business income (QBI) deduction?

The qualified business income (QBI) deduction, also called the Section 199A deduction, allows eligible owners of pass-through businesses to deduct up to 20 percent of qualified business income, subject to limits. The IRS notes the rules were updated for tax years beginning after 2025.

Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that keeps business income, owner pay, and payroll records reconciled, so your tax professional can evaluate the deduction accurately.

How to prepare

Keep business income and expenses recorded by activity
Track owner wages and payroll separately from distributions
Review the IRS page and ask your tax professional whether you qualify and how limits apply

Why it matters for service firms

The deduction can be significant for pass-through owners, but eligibility and limits are technical. Clean books and a clear record of owner pay make the evaluation faster and more reliable.

Frequently asked questions

Who may be eligible for the QBI deduction?

The IRS says eligible taxpayers include owners of pass-through businesses such as sole proprietorships, partnerships, and S corporations, subject to limits. Whether you qualify depends on your facts, so confirm with a tax professional.

Do the rules change over time?

Yes. The IRS notes updates for tax years beginning after 2025. Check the current IRS page each year and review your situation with your tax professional before relying on any figure.

Official source: IRS: Qualified business income deduction.

This page is for informational purposes only and does not constitute formal legal or tax advice. Always consult a qualified tax professional about your specific situation.