What Is the QBI Deduction?
The qualified business income (QBI) deduction, under Section 199A of the US tax code, lets many owners of pass-through businesses — such as sole proprietorships, partnerships, and S corporations — deduct up to 20% of their qualified business income, subject to income-based limits and rules for certain service businesses.
How It Works
The deduction reduces taxable income but not self-employment tax. Above certain income levels, limits based on wages paid and business property, and restrictions on specified service businesses, can apply.
Example
With 50,000 of qualified business income and no limits applying, the deduction could be up to 10,000.
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🔗 Related Terms
More Taxes Terms
- Additional Medicare Tax
- Adjusted Gross Income (AGI)
- Alternative Minimum Tax (AMT)
- Capital Gains Tax
- Capital Loss
- Child Tax Credit
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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.