2026 QBI deduction: what changed for small-business owners

The qualified business income deduction, often called QBI or Section 199A, remains relevant to eligible owners of pass-through businesses in 2026. Two changes deserve attention: wider income ranges over which certain restrictions phase in, and a minimum deduction for some owners of active businesses.

These are owner-level tax questions. Your business's bank balance, gross sales and reported profit are not interchangeable with the taxable income used in the QBI calculation.

The 2026 income ranges

Revenue Procedure 2025-32, section 4.26 lists the following amounts for tax years beginning in 2026:

• Married filing jointly: Threshold where relevant restrictions begin: $403,500; End of phase-in range: $553,500.
• Married filing separately: Threshold where relevant restrictions begin: $201,775; End of phase-in range: $276,775.
• All other returns: Threshold where relevant restrictions begin: $201,750; End of phase-in range: $276,750.

Use taxable income before the QBI deduction, under the applicable calculation rules, rather than simply inserting your sales or Schedule C profit. The consequences of exceeding a threshold differ between a specified service trade or business and other qualified businesses. Crossing the first threshold does not automatically mean every owner loses the entire deduction.

The new minimum is specifically for eligible active businesses

Section 70105 of Public Law 119-21 provides a minimum $400 deduction for an applicable taxpayer with at least $1,000 of aggregate QBI from active qualified trades or businesses. “Active” for this rule requires material participation under the referenced tax standard.

The $1,000 condition concerns this minimum-deduction rule. It should not be described as a new universal minimum profit requirement for every ordinary QBI deduction. The normal calculation and the special minimum must be evaluated under their respective rules.

An owner who is eligible for a larger deduction does not add another $400 on top. The statutory minimum operates as a floor for applicable taxpayers, not a separate bonus deduction.

Why clean owner-level information matters

Prepare the business profit-and-loss report, prior-year return, ownership details, payroll information and any partnership or S-corporation tax schedules. Include other household income in the planning discussion. An owner can have modest business profit but enough other income to enter a limitation range.

For example, a consulting business's QBI review may change because a spouse's wages increase. That is a reason to update the household forecast, not to change the business records to force a desired result.

Review before choosing year-end transactions

Ask which income items qualify, whether the activity is a specified service business, what participation records are needed and how any planned deductions interact with QBI. Avoid assuming that a business expense produces both a full expense deduction and an unchanged QBI benefit.

Tax N Tips provides tax planning and business advisory. Book a consultation to review the business and household figures together.

Sources checked September 5, 2026.