The QBI Deduction Explained for Small Businesses

What is Changing With the One Big Beautiful Bill Act?

Starting in 2026, the One Big Beautiful Bill Act (OBBBA) changes how the QBI deduction works. These changes raise certain income limits, allowing more small business owners to potentially qualify for the full 20% deduction.

The law also introduces a minimum $400 deduction for anyone earning at least $1,000 of qualified business income, with the amount increasing slightly each year for inflation.

It’s important to know that service businesses—like law firms, medical practices, or accounting firms—may face limits. If their income is above certain levels and mostly comes from the personal skills of the owners, their deduction could be reduced or even taken away.

Questions SMBs Should Be Asking About the QBI Deduction

To truly leverage this deduction, you need to understand where your business stands. Start by asking these crucial questions about your income, industry, and future plans:

• Could I claim the full 20% QBI deduction? Check whether your business type and income qualify under current and 2026 rules.
• Does my business face service-industry limits? If you’re in a service field, your income level may reduce or remove the deduction.
• Am I eligible for the new minimum? With at least $1,000 in qualified business income, you may qualify for the minimum benefit.
• Could changing my business structure boost savings? Review whether becoming an S-corp or adjusting compensation could increase your deduction.

What You Can Do Next to Maximize Your QBI Benefits

Once you have a clearer picture of your eligibility, it's time to take action:

• Utilize AI legal tools, like Rocket Lawyer’s Copilot, to quickly check your business’s QBI qualification under current rules and the updated rules starting in 2026.
• Project your income to understand how changing earnings might impact your deduction down the line.
• Consult a trusted tax professional to explore how adjusting your business structure or payroll could increase your tax break.
• Start planning for 2026 now, as the updated rules under OBBBA may open the door to additional tax savings.

To truly harness the potential of the QBI deduction, you might have more questions about its specific application to your business. For personalized guidance and to explore your unique situation, consider leveraging tools like Rocket Lawyer’s Copilot or connecting with a Tax Pro. They can help you navigate the details and ensure you're maximizing this valuable tax benefit.