If you own a sole proprietorship, partnership, LLC or S corporation, the qualified business income (QBI) deduction lets you deduct up to 20% of your business profit on your personal return. It was due to expire after 2025. It didn't.
What changed
It's permanent. The 2025 tax law removed the expiration date. The rate stays at 20%. (You may see 23% quoted online; that was an earlier House proposal that didn't make the final law.)
Wider phase-in window, starting 2026. Above an income threshold, limits based on W-2 wages and property kick in, and service businesses lose the deduction. The range over which that happens widens from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. More owners near the threshold keep a partial deduction.
New $400 minimum, starting 2026. If you have at least $1,000 of QBI from businesses you actively run, you get at least a $400 deduction. Both amounts adjust for inflation.
Quick refresher: how it works
Below the income threshold, most owners simply deduct 20% of QBI, limited to 20% of taxable income. Above it, two things can shrink the deduction:
Wage and property limits. The deduction can't exceed the greater of 50% of W-2 wages paid by the business, or 25% of wages plus 2.5% of the original cost of qualifying property.
Specified service businesses such as law, accounting, consulting, health, financial services and performing arts phase out entirely above the range.
Planning moves worth a conversation
S corp owners: your salary reduces QBI but also counts as W-2 wages. Finding the right balance is worth modeling.
Owners near the threshold: retirement contributions and timing of income can keep you inside the full-deduction zone.
Real estate investors: rental activity may qualify if it rises to a trade or business; documentation matters.
Watch list: the hiring credit that lapsed
The Work Opportunity Tax Credit (WOTC), worth up to $2,400 per eligible hire (more for certain veterans), expired for employees who started after December 31, 2025. Congress has extended it retroactively after past lapses, and bills to renew it are pending, but nothing has passed as of this writing.
If you hire from WOTC target groups, keep filing Form 8850 with your state workforce agency within 28 days of each hire. States are holding those requests, so you'll be positioned to claim the credit if it's renewed retroactively. Just don't count on it in your budget until a bill is signed.
Unboring is educational content, not tax advice. Thresholds adjust annually; confirm with a qualified tax professional.
