What Is the Section 199A Deduction?

The Section 199A deduction, commonly called the qualified business income (QBI) deduction, was created by the 2017 Tax Cuts and Jobs Act and allows most self-employed individuals, partners, S corporation shareholders, and landlords to deduct up to 20% of their qualified business income from their taxable income. For taxpayers below certain income thresholds ($191,950 for single filers and $383,900 for married couples in 2024), the deduction is generally straightforward — 20% of net business income. Above those thresholds, the deduction is limited based on W-2 wages paid and the unadjusted basis of qualified property, and certain service businesses (like law, accounting, and financial services) face additional restrictions or phase-outs. Unlike many deductions, the QBI deduction is taken on the personal return regardless of whether you itemize, effectively reducing the personal tax rate on pass-through income. The deduction is scheduled to expire after 2025 unless Congress acts to extend it.