The Section 199A deduction gives many pass-through business owners a do-nothing 20 percent deduction based on qualified business income (QBI). With $100,000 in QBI and $100,000 in taxable income, you get a $20,000 deduction on your Form 1040 without lifting a finger.
The deduction is now permanent, and 2026 is the first year that three improvements apply:
1.
The phase-in range above the taxable income threshold—where your deduction shrinks but doesn’t disappear—is 50 percent wider: $75,000 for singles (up from $50,000) and $150,000 on a joint return (up from $100,000).
2.
If you have at least $1,000 of QBI from a business in which you materially participate, you get a minimum $400 deduction.
3.
For Section 199A purposes, you compute taxable income without regard to the new limitation on itemized deductions for taxpayers in the 37 percent bracket.
For a deeper look at the changes, see 2026 Section 199A: Is Your Service Business Out of Favor?.
Planning gets serious when your 2026 taxable income exceeds the $201,750 threshold (or $403,500 on a joint return). Above that, your type of business, wages paid, and property can reduce or eliminate the deduction, and for an out-of-favor “specified service” business, the deduction phases down to $0 at $276,750 (or $553,500 on a joint return). Use the 2026 Section 199A calculator to see where you stand—business by business. If you have more than one business, read How to Find Your 2026 Section 199A Deduction with Multiple Businesses.
Here are eight strategies to use before December 31, 2026. One distinction runs through all of them: some deductions reduce both your taxable income and your QBI; others reduce taxable income only. When you are trying to get under the threshold, the second kind is more efficient. ... Log in to view full article.
