QBI optimization
Protect the 20% pass-through deduction most owners quietly lose.
The Qualified Business Income (QBI) deduction can knock 20% off your qualified business income — but income thresholds, W-2 wage limits, and specified service trade rules routinely reduce or eliminate it. Careful structuring restores it.
How it works
QBI (IRC §199A) gives owners of pass-through entities (sole props, partnerships, S-corps) a deduction of up to 20% of qualified business income — a direct reduction in taxable income, not just a credit. Under the One Big Beautiful Bill Act (OBBBA), signed in 2025, the §199A deduction is now permanent and the phase-in ranges widen starting in 2026.
For 2025, the full deduction is available below $394,600 taxable income (MFJ) or $197,300 (single/HoH). Above that, limitations phase in over a $100,000 range for MFJ and $50,000 for single — capped by W-2 wages and qualified property for most businesses, and fully phased out at the top for Specified Service Trades or Businesses (SSTBs: health, law, accounting, consulting, financial services, etc.).
For 2026, thresholds rise to $403,500 MFJ / $201,750 single, and phase-in ranges widen to $150,000 MFJ / $75,000 single — meaning more taxpayers get partial benefits at higher incomes. A QBI-focused engagement examines entity structure, W-2 compensation, retirement plan interactions, and aggregation elections to restore or preserve the deduction where possible.
You may qualify if
- You own a pass-through business
- Your household taxable income is $300K+
- You have W-2 wages or qualified property in the business
- Your CPA hasn't run a formal QBI optimization
What the engagement looks like
01
Fit check
Intake covers entity type, comp, profit, and W-2 wages.
02
Analysis
Specialist models QBI at current and alternative comp/entity structures.
03
Recommendation
Concrete restructuring plan and payroll adjustments if needed.
04
Coordinate
Handoff to your CPA and payroll provider for clean implementation.
Case study
Two-partner consulting firm
Management consulting (SSTB) · California
Situation
Two partners in a management consulting S-Corp were each pulling $260K in W-2 comp and $220K in K-1 profit. As an SSTB above the phase-out, their QBI deduction was $0.
Approach
The specialist modeled reducing W-2 comp to reasonable levels, increasing cash balance retirement contributions, and coordinating spousal income to bring household taxable income below the SSTB phase-out ceiling.
Result
Each partner recovered ~$44K in QBI deduction (20% × $220K K-1) plus the ~$72K in cash balance contributions cut federal + state taxable income further. Net household tax savings of ~$38K per partner in year one.
QBI recovered / partner
~$44K
Tax savings / partner
~$38K
Study fee
$5,000
Illustrative example based on typical engagement outcomes. Actual results depend on your specific facts.
Common questions
I'm in an SSTB — is there anything I can do?
Yes. The deduction phases out based on taxable income, not gross income. Retirement contributions, income timing, and spousal income planning can bring you below the phase-out.
Does lowering my S-Corp salary always help?
No. Below the threshold, low W-2 comp can help; above it, W-2 wages are the limiting factor for non-SSTBs. The optimization is a joint model, not a rule of thumb.
Is QBI going away?
No. The One Big Beautiful Bill Act (OBBBA), signed in 2025, made the §199A deduction permanent and, starting in 2026, widens the phase-in ranges to $150K MFJ / $75K single — giving more owners partial benefits at higher income levels. A small minimum deduction also applies in some cases from 2026 onward.
Ready to see if this fits?
Short intake, no cost, matched with a specialist within days.