Section 199A QBID: The 20% Qualified Business Income Deduction Is Here to Stay

If you own a business in the USA that is not taxed as a C corporation, one of the most valuable business tax deductions is now a permanent part of the internal revenue code

Section 199A, commonly known as the Qualified Business Income Deduction (QBID), can allow eligible business owners to deduct up to 20% of their qualified business income.

The deduction was originally scheduled to expire after 2025.

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made it permanent and improved certain rules beginning in 2026.

For business owners, that makes Section 199A an important part of long-term tax planning.

A Little History: Where Did Section 199A Come From?

Section 199A was created as part of the Tax Cuts and Jobs Act of 2017 (TCJA) and became effective in 2018.

The TCJA permanently reduced the federal corporate income tax rate to 21%. At the same time, Congress created Section 199A to provide a significant tax benefit to many owners of businesses operating outside the C corporation structure.

The deduction can generally apply to income from:

• Sole proprietorships

• Single-member LLCs

• Partnerships and LLCs taxed as partnerships

• S corporations

The deduction is generally claimed by the individual business owner, not by the S corporation or partnership itself.

C corporations do not qualify for the Section 199A deduction, and wages earned as an employee are not qualified business income.

How Does the 20% Deduction Work?

The basic concept is straightforward.

Suppose your qualifying business generates $200,000 of qualified business income.

Your starting calculation could be:

$200,000 × 20% = $40,000 potential deduction

That does not necessarily mean you will receive the entire $40,000 deduction. Your overall taxable income, type of business, payroll, and other factors can limit the amount.

The deduction reduces taxable income for federal income-tax purposes. It does not reduce self-employment tax.

What Changed Under OBBBA?

The biggest change is simple:

Section 199A is now permanent.

Under the original 2017 law, the deduction was scheduled to expire after 2025. OBBBA removed that expiration.

Beginning in 2026, OBBBA also widened the income range over which certain limitations gradually take effect.

For 2026, the important taxable-income levels are:

Filing Status	Limitations Begin	Top of Phase-In Range
Married Filing Jointly	$403,500	$553,500
Single / Head of Household	$201,750	$276,750
Married Filing Separately	$201,775	$276,775

These thresholds are based on taxable income, not simply your business revenue or profit.

OBBBA widened the phase-in range to $75,000 for most taxpayers and $150,000 for married couples filing jointly. This means the limitations take effect more gradually than under the previous rules.

OBBBA also introduced a $400 minimum deduction beginning in 2026 for certain qualifying active businesses, subject to specific requirements.

Is There an Income Limit?

Yes, but there is an important distinction:

There is no single income level that automatically eliminates the Section 199A deduction for every business owner.

What happens at higher income levels depends largely on the type of business you own.

Certain professional and service businesses are classified as Specified Service Trades or Businesses (SSTBs). These generally include businesses in areas such as:

• Health

• Law

• Accounting

• Consulting

• Financial services

• Investment management

• Brokerage services

• Performing arts and athletics

Architecture and engineering are specifically excluded from the SSTB category.

For an SSTB owner, the deduction begins to become restricted once taxable income exceeds the applicable threshold. Once taxable income exceeds the top of the phase-in range, income from the SSTB generally no longer qualifies for the deduction.

For example, for a married couple filing jointly in 2026:

$403,500 or less: The SSTB income limitation generally does not apply.

$403,500–$553,500: The limitation gradually phases in.

Above $553,500: Income from the SSTB generally no longer generates a Section 199A deduction.

This can be especially important for high-income physicians, attorneys, accountants, consultants, and financial professionals.

Why Planning Matters

Making Section 199A permanent does not mean every business owner will automatically receive the full 20% deduction.

Depending on your circumstances, the amount can be affected by:

• Your taxable income

• The type of business you own

• S corporation compensation

• Business payroll

• Retirement-plan contributions

• Investments in business property

• Timing of income and deductions

• Your overall business and entity structure

That creates planning opportunities, particularly for business owners whose taxable income is approaching the Section 199A thresholds.

The Bottom Line

Section 199A started in 2018 as a temporary tax benefit. OBBBA has now made it a permanent part of the tax code while improving certain rules beginning in 2026.

For qualifying business owners, the deduction can be worth up to 20% of qualified business income.

But the amount you actually receive depends on your income and the type of business you own. High income can eliminate the deduction for certain service businesses, while many other qualifying businesses can continue receiving the deduction subject to payroll and business-property limitations.

Now that Section 199A is permanent, business owners should consider it as part of their long-term tax strategy, rather than simply a deduction calculated when the tax return is prepared.

At Voyage Consulting, we help business owners understand how their business structure, compensation, retirement planning, and taxable income interact with Section 199A and other tax-planning opportunities.

Effective tax planning starts before the tax return is prepared