The One Big Beautiful Bill (OBBB), enacted on July 4, 2025, as Public Law No. 119-21, represents a comprehensive piece of tax legislation addressing various aspects of the U.S. tax code, including deductions, credits, and business provisions. This bill aims to provide stability and clarity for taxpayers by extending or modifying key elements of existing tax laws.

As part of our commitment to keeping our clients informed, TRP Sumner PLLC is launching a series of articles highlighting relevant components of the OBBB that we believe will be particularly helpful for small business owners, real estate professionals, and other taxpayers. This is the first installment in the series, focusing on one of the bill’s most significant benefits.

Permanent QBI Deduction: A Win for Small Business Owners

The Qualified Business Income (QBI) deduction, established under Section 199A of the Internal Revenue Code, has been a valuable tax benefit for many small business owners since its introduction in the Tax Cuts and Jobs Act of 2017. This deduction allows eligible taxpayers—primarily those operating pass-through entities such as sole proprietorships, partnerships, S corporations, and certain trusts—to deduct up to 20% of their qualified business income from taxable income.

Originally, the provision was temporary and scheduled to expire at the end of 2025, creating uncertainty for long-term financial planning.

With the passage of the OBBB, the QBI deduction has been made permanent, removing the sunset date and ensuring its availability for future tax years. This permanence provides a significant advantage for small business owners by offering ongoing tax relief and greater predictability in managing their finances.

Understanding the QBI Deduction Basics

Qualified business income generally includes profits from a trade or business conducted in the United States, excluding certain types of income like capital gains, dividends, or interest. The deduction is calculated as the lesser of:

• 20% of the taxpayer’s QBI, or
• 20% of the taxpayer’s taxable income minus net capital gains.

For taxpayers with higher incomes, phase-out thresholds apply. For tax year 2025, these begin at approximately $197,300 for single filers and $394,600 for married filing jointly (indexed annually for inflation). Above these levels, the deduction may be limited based on factors such as the amount of W-2 wages paid by the business or the unadjusted basis of qualified property.

Additionally, specified service trades or businesses (SSTBs)—such as those in health, law, accounting, consulting, or financial services—face further restrictions or complete phase-outs at higher income levels.

Despite these limitations, the deduction has proven to be a powerful tool for reducing effective tax rates, often allowing business owners to retain more earnings for reinvestment, expansion, or personal use.

How the OBBB Secures the Deduction’s Future

The OBBB directly amends Section 199A by eliminating the expiration clause, making the 20% deduction a permanent fixture in the tax code.

The law also introduces two important enhancements:

• Beginning in 2026, taxpayers with at least $1,000 of aggregate qualified business income from active businesses are guaranteed a minimum QBI deduction of $400 (inflation-adjusted starting in 2027).
• Certain phase-in amounts used in the statute were increased (for example, from $50,000/$100,000 to $75,000/$150,000) to provide a more gradual application of the limitations at higher income levels.

For example, consider a sole proprietor with $200,000 in QBI. Under the permanent rules, they could potentially deduct $40,000, reducing taxable income and lowering overall tax liability. (This is a simplified example — the actual deduction may be limited by taxable income, W-2 wage/UBIA calculations, or SSTB restrictions.)

Importantly, the OBBB does not alter the core 20% rate or introduce new restrictions beyond these adjustments, preserving the deduction’s accessibility for a wide range of eligible businesses.

Benefits for Small Business Owners

• Making the QBI deduction permanent is particularly advantageous in several ways:
• Tax Planning Certainty: Business owners can now incorporate the deduction into long-term strategies without worrying about its expiration.
• Encouragement for Entrepreneurship: By providing ongoing tax incentives, the provision supports new and existing small businesses, fostering innovation and job creation.
• Simplified Compliance: Without an impending sunset, taxpayers avoid the need for rushed adjustments or alternative planning in anticipation of changes.
• Broad Applicability: The deduction continues to apply across diverse industries, from retail and manufacturing to real estate and professional services (subject to limitations).
• While permanence is a clear win, eligibility and calculation can be complex, often requiring detailed record-keeping and professional guidance to maximize the benefit.

TRP Sumner Can Help

At TRP Sumner PLLC, we recommend reviewing your business structure and income sources to ensure you’re fully leveraging the permanent QBI deduction and new OBBB provisions. If you’d like assistance in evaluating how these changes apply to your situation or exploring other aspects of the OBBB, please contact our team for a consultation.