Qualified business income deduction

The QBI deduction, also called Section 199A, is for owners whose business income flows to a personal return. The IRS lists sole proprietorships, partnerships, S corporations and some trusts and estates. An owner of an S corporation often claims it.

Income earned through a C corporation or as an employee does not qualify. Wages and property limits can reduce the deduction at higher income. The IRS says the deduction is up to 20 percent of QBI, with rules that changed for tax years after 2025, so check the current form. A lower salary can raise QBI, but the pay must still be reasonable. The tax planning page covers this.