The 20% qualified business income deduction that sole proprietors, partnerships, and S corporation owners rely on is no longer scheduled to expire, and starting with the 2026 tax year, it comes with a minimum benefit for small filers. The IRS describes the Section 199A deduction as allowing eligible taxpayers to deduct up to 20% of qualified business income plus 20% of qualified REIT dividends and publicly traded partnership income.
The One Big Beautiful Bill Act removed the expiration date that had been hanging over the deduction since it was created. For self-employed filers who had been planning around a possible sunset, that planning assumption is gone.
What Changed For 2026
The headline change is permanence. The deduction previously carried an end date, and tax planning for anyone with pass-through income had to account for it disappearing. It no longer does, and the rate stays at 20% rather than rising as some proposals had suggested.
The second change is a floor. Beginning in 2026, a taxpayer with at least 1,000 dollars of QBI from an active qualified trade or business can claim a minimum deduction of 400 dollars, regardless of how the standard calculation works out.
The phase-in ranges for the wage and investment limits also widen in 2026, moving from 100,000 dollars to 150,000 dollars for married couples filing jointly and from 50,000 dollars to 75,000 dollars for everyone else.
Why This Matters For Self-Employed Filers
The minimum deduction is aimed squarely at the small end. A side business clearing a few thousand dollars often generated a QBI deduction so small it barely registered, and the 400-dollar floor changes that calculus for part-time and early-stage operations.
Permanence matters more for anyone weighing entity structure. Decisions about staying a sole proprietor versus electing S corporation treatment turn partly on how long the deduction will exist, and that variable is now settled.
The wider phase-in ranges give higher-earning consultants and service providers more room before the wage and property limits start biting. For solo operators with no employees and little qualified property, those limits are where the deduction typically gets cut down.
What Self-Employed Readers Should Do Next
Recheck your Q3 estimated payment against the current rules rather than last year’s assumptions. If you built your safe-harbor number around a shrinking or expiring deduction, you may be overpaying.
If you have a small side business you had written off as too minor for QBI, run the numbers again. Clearing 1,000 dollars of active qualified business income is a low bar, and the 400-dollar minimum can exceed what the standard calculation would have produced.
Talk to whoever prepares your return before year-end rather than in April. Entity structure changes and retirement contributions both interact with QBI, and both have deadlines that fall well before filing season.
What To Watch Next
Watch for updated IRS guidance and revised Form 8995 instructions reflecting the minimum deduction, since the mechanics of claiming it will be spelled out there rather than in the statute.
Watch how the change interacts with the other OBBBA provisions landing on self-employed returns at the same time. Our coverage of the IRS finalizing no-tax-on-tips rules for self-employed workers looks at another 2026 change with its own eligibility tests.
Finally, watch the income thresholds. The full deduction phases out above roughly $ 200,000 for single filers and $ 400,000 for joint filers, and those figures are indexed, so the number that applied last year is not the number that applies now.
Photo by Joachim Schnürle: Unsplash
