Qualified business income deduction (Section 199A)
The Section 199A deduction lets owners of pass-through businesses deduct up to 20% of their qualified business income. It covers sole proprietors, partners, S corporation shareholders and some trust beneficiaries.
Above an income threshold the deduction is limited by W-2 wages and the basis of qualified property, and specified service businesses such as law, health and accounting lose it gradually. OBBBA made the deduction permanent.
Example. Daniel's plumbing business earns $80,000 of qualified income and his taxable income is below the threshold, so he deducts 20%, or $16,000.
By Binod Raj Singh, CPA (licensed in Montana) · Updated for the 2026-2027 exam windows · Last updated 2026-11-05