The QBI Deduction Explained — and the Proposed Change Worth Watching

If you own a pass-through business — a sole proprietorship, partnership, S corporation, or LLC — one of the most valuable tax breaks available to you is the Qualified Business Income deduction. Yet many owners don’t fully understand it, and a bill now in Congress could make it even more generous. Here’s what the QBI deduction is and what may be coming.

A hand pointing at financial charts during a review — The QBI deduction is one of the biggest tax breaks for small business owners.

What the QBI deduction does

Created by the 2017 tax law, the Qualified Business Income deduction — also called the Section 199A deduction — currently lets eligible owners of pass-through businesses deduct up to 20% of their qualified business income. In practical terms, if your business earns $100,000 in qualified income, you may be able to deduct up to $20,000 before calculating your income tax, lowering your taxable income significantly.

Who qualifies

The deduction is aimed at pass-through entities, where profits flow through to the owner’s personal return. There are income thresholds and special rules for certain service businesses at higher income levels, and the calculation can get nuanced — which is exactly why it’s worth reviewing with a professional rather than guessing.

A piggy bank surrounded by coins — Claimed correctly, the QBI deduction can save owners thousands each year.

The proposed change worth watching

In April 2026, Representative David Kustoff introduced the Small Business Tax Cut Act, a bill that would increase the QBI deduction from 20% to 23%. If it becomes law, that three-point bump could translate into meaningful additional savings for many small business owners. It’s important to stress that this is proposed legislation, not current law — so it’s something to monitor and plan around, not to count on yet.

What to do now: Make sure you’re claiming the 20% deduction you’re already entitled to under current law, and keep an eye on the proposed increase. If it passes, your tax planning may be worth revisiting.

A notebook and planning accessories laid out on a desk — Proactive planning is how you turn tax law into real savings.

The bottom line

The QBI deduction is one of the most significant tax advantages available to small business owners today, and a proposed increase could make it even better. Make sure you’re taking full advantage of the current 20% deduction, stay informed on the potential change, and revisit your plan if the law shifts.

Want to be sure you’re capturing the full QBI deduction? KSR Financial Solutions helps small business owners minimize their tax bill. Contact us today.

This article is for general educational purposes and is not tax advice. Tax legislation can change. Consult a qualified professional about your specific situation.