QBI Deduction: Who Qualifies and How to Claim It
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The QBI Deduction, introduced under the Tax Cuts and Jobs Act of 2017, has provided substantial tax relief to eligible small business owners. However, with its expiration slated for December 31, 2025, business owners must understand how to maximize this benefit before it sunsets (Thrivent, 2024).
Eligibility and Phase-Out Thresholds at QBI Deduction
For the 2025 tax year, the QBI deduction allows eligible taxpayers to deduct up to 20% of their qualified business income. However, this deduction is subject to income limitations:
- Single Filers: Full deduction available for taxable income up to $191,950; phased out up to $241,950.
- Married Filing Jointly: Full deduction available for taxable income up to $383,900; phased out up to $483,900
Taxpayers with income exceeding these thresholds, particularly those in specified service trades or businesses (SSTBs) such as law, accounting, and consulting, may see a reduced or eliminated deduction. It's crucial to assess your taxable income and understand how these thresholds impact your eligibility. For a comprehensive overview of the QBI deduction and its implications, visit our blog.
QBI Deduction: Industry-Specific Implications
The Qualified Business Income (QBI) deduction, introduced under the Tax Cuts and Jobs Act (TCJA) of 2017, will expire on December 31, 2025. This 20% deduction for eligible pass-through businesses has provided substantial tax relief, but its sunset will impact various industries (IRS, 2023).
Multifamily Real Estate & Self-Storage
Real estate investors have used the QBI deduction to boost cash flow and investment returns. Without it, taxable income will rise, reducing profitability. Alternative tax strategies, such as restructuring ownership entities, may help mitigate the impact (Smith + Howard, 2024).
Campgrounds, RV Parks & Mobile Home Parks
These businesses have leveraged QBI to offset operational costs, keeping margins healthy. The end of this deduction may require adjusting pricing models and expense management to remain competitive (IRS, 2023).
Private Equity Funds & SaaS Companies
QBI has helped firms lower taxable income and enhance cash reserves. With its expiration, businesses must consider alternative tax planning, including restructuring their operations or timing income recognition (Smith + Howard, 2024).
Marinas, Hotels & Short-Term Rentals
The hospitality industry has benefited from QBI, allowing businesses to optimize net earnings. Losing this deduction means taxable income will increase, making proactive pricing and financial planning crucial (Thrivent, 2023).
Cryptocurrency & Digital Assets
While the end of QBI won't directly impact crypto investors, the IRS has introduced new reporting rules requiring digital asset brokers to disclose sales and exchanges starting in 2025.
Act Now
With the QBI deduction set to expire, affected businesses must engage in proactive tax planning to avoid unnecessary tax burdens. Consulting a financial advisor is key to staying ahead of these changes.
Strategies to Maximize Tax Benefits
- Accelerate Income Recognition: Consider strategies to recognize more income before the deduction expires, thereby maximizing the benefit.
- Review Business Structure: Evaluate whether your current business entity is optimized for tax efficiency in the post-QBI deduction landscape.
- Utilize Other Deductions: Explore other available deductions and credits to offset potential increases in taxable income.
- Consult Tax Professionals: Engage with tax advisors like Parikh Financial to develop a tailored plan addressing your specific circumstances.
Act Now: The QBI Deduction Expires Soon!
With the QBI deduction set to expire after 2025, eligible business owners must take full advantage of this tax-saving opportunity while it lasts.
At Parikh Financial, we help small business owners navigate complex tax regulations and optimize their tax strategies. Our expertise includes:
- Tax Planning & Compliance – Minimize liabilities while staying IRS-compliant.
- Industry-Specific Strategies – Tailored tax solutions for real estate, SaaS, private equity, and more.
- Investment Advisory – Adjust your financial strategies to stay ahead of tax law changes with us.
The QBI deduction expires at the end of 2025. Proactive planning is essential to maximize your tax benefits before it’s too late.
- Book a Consultation – Get a personalized tax strategy for your business.
- Explore More – Visit our blog for expert tax insights.
Frequently asked
Questions, answered
Is the QBI deduction still expiring after 2025?
No. The One Big Beautiful Bill Act, signed July 4, 2025, made the Section 199A QBI deduction permanent and kept the 20% rate. The scheduled December 31, 2025 sunset no longer applies, so pass-through owners do not need to plan around losing it. Most structural changes the law made take effect for tax years beginning after December 31, 2025, meaning your 2025 return generally follows the prior rules while 2026 and later reflect the updates.
Who can claim the QBI deduction, and which businesses are excluded?
Owners of pass-through businesses can claim it: sole proprietors, partnerships, S corporations, and most LLCs, plus qualified REIT dividends and PTP income. C corporations cannot. Specified service trades or businesses (SSTBs), such as law, accounting, consulting, health, and financial services, face limits once income passes certain thresholds. Wages you earn as an employee, capital gains, dividends, and most interest income do not count as qualified business income.
How does income affect the QBI deduction for service businesses like accounting or consulting?
Below the income threshold, eligible owners take the full 20% regardless of business type. Above it, the deduction phases down using wage and property limits, and for SSTBs it phases out entirely. Starting in 2026, the OBBBA widens that phase-in range, giving SSTB owners more room before the deduction disappears. Because the calculation hinges on taxable income, timing income, managing W-2 wages, and entity structure all influence what you ultimately keep.