QBI (§199A) After 2025 Law Changes: Permanence, Wider Phase-In, Minimum Deduction

Author: Gloria Liu, CPA ｜ YCL Tax, Accounting & Advisory

One-sentence takeaway

If you earn qualified business income (QBI) through a sole proprietorship, partnership, or S corporation, 2025 federal tax legislation (often called OBBBA / Working Families Tax Cuts, P.L. 119-21) §70105 keeps the §199A 20% deduction in place for tax years beginning after December 31, 2025, widens the wage/UBIA and SSTB phase-in ranges, and adds a conditional $400 minimum deduction (tied to roughly $1,000 of active QBI—details 待核). Treat this as compliance modeling and documentation, not a prediction of a lower bill.

Background

§199A, created by the TCJA, had been scheduled to expire after 2025. Section 70105 of the 2025 reconciliation act extends and enhances §199A for years beginning after Dec. 31, 2025 (2026 for most calendar-year filers). CRS and the enacted text highlight: continued 20% architecture; phase-in width $50k→$75k (single) and $100k→$150k (joint); and a rewritten minimum-deduction rule under §199A(i) (inflation adjustments after 2026—待核 form instructions).

Old vs new (high level)

1. Duration: Old—possible sunset after 2025; New—continues for 2026+ (watch technical corrections—待核).

2. Phase-in width: Old—$50k/$100k bands above threshold; New—$75k/$150k before full limitation.

3. 2026 thresholds (Rev. Proc. 2025-32—recheck at publish): MFJ about $403,500 (phase complete about $553,500); other returns about $201,750 / $276,750; MFS about $201,775 / $276,775.

4. Minimum deduction: For eligible “applicable taxpayers” with enough active QBI, deduction not less than about $400 vs the regular computation—待核 “active” definition.

5. Unchanged core: QBI definition, W-2/UBIA limits, SSTB rules, Forms 8995/8995-A.

6. State: North Carolina conformity to the enhanced federal rule—待核 NCDOR.

Self-check list

1. You are an S-corp shareholder, partner, or Schedule C owner in Cary/RTP.

2. Taxable income is near or above 2026 thresholds—rerun wage/SSTB phase math.

3. Your work may be an SSTB (consulting/professional services).

4. Small QBI that might touch the minimum-deduction gate (待核 activity tests).

5. You also elect PTET—coordinate workpapers with the federal QBI file (see PTET pack).

Simplified example (illustrative only)

A single consultant has ~$180,000 QBI and taxable income just above the 2026 threshold:

1. Pre-law intuition: A narrower $50k band could restrict wage/SSTB-related deduction faster.

2. Post-law intuition: A $75k band may mean limits are not fully phased in at the same income point—must recompute on Form 8995-A, not napkin math.

3. Very small QBI: Test minimum-deduction eligibility (待核) and keep books showing a real trade or business.

Action timeline

1. TY2025 (filed in 2026): Complete 8995/8995-A under 2025 rules/instructions then in force.

2. During 2026: Refresh projections—thresholds, wider phase-in, wages, PTET, reasonable compensation.

3. Books: Segregate QBI vs investment items vs possible SSTB activity; retain W-2 and UBIA support.

4. TY2026 (filed in 2027): Follow final 8995-series instructions (待核).

5. NC / multi-state: Confirm state conformity separately (待核).

What YCL can do

1. §199A workpapers and Forms 8995/8995-A compliance preparation.

2. Illustrative SSTB / threshold scenario comparisons (illustrative only; results vary).

3. S-corp reasonable compensation vs QBI wage-limit coordination.

4. PTET and federal QBI file alignment.

5. Cary (RTP) + Shanghai; CPAs Chenchen Liu and Gloria—compliance planning and Free Consultation.

FAQ

Q: Does permanence mean everyone gets 20%?

A: No. Higher-income taxpayers may still face W-2/UBIA and SSTB limits.

Q: Does everyone get the $400 minimum?

A: No. Statutory conditions (including active QBI) apply; follow final Code/IRS text (待核).

Q: Does this article mean my 2026 bill will be lower?

A: No. This article is a rules map for compliance readiness only; outcomes depend on facts and state law and are not promised.

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Disclaimer

This article is general tax information only and is not tax, legal, or investment advice for any person or business. Application depends on your facts and the latest IRS, FinCEN, and NCDOR guidance. Items marked 待核 require verification before filing. Consult a licensed professional for advice specific to you.