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QBI Made Permanent: Every Florida Pass-Through Owner's 2026 Win
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If you own an LLC, S-corp, partnership, or sole proprietorship in Florida, one of the most valuable tax breaks in the entire code just became a permanent fixture on your return. The 20% Qualified Business Income (QBI) deduction — the Section 199A deduction created by the 2017 Tax Cuts and Jobs Act — was scheduled to sunset at the end of 2025. Then, on July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, and the sunset disappeared.
For Florida small business owners, this is one of the biggest pieces of certainty the tax code has handed us in a decade. Planning horizons that were frozen at "what happens if Congress lets QBI expire?" are unfrozen. And the 2026 version of the deduction comes with a few important upgrades — including a brand-new minimum deduction that guarantees certain taxpayers at least $400 off their bill — that make it more powerful than ever.
Here is what changed, what is new for 2026, and what you should be doing before your next quarterly payment.
What the QBI Deduction Actually Does
The Section 199A deduction lets eligible pass-through business owners deduct up to 20% of their qualified business income directly from taxable income on their personal return. On its face, it is one of the most generous provisions in the code: a business owner in the 24% federal bracket who qualifies for the full 20% deduction is effectively paying tax at a 19.2% rate on the qualifying slice of income.
"Pass-through" entities include sole proprietorships (Schedule C), single-member and multi-member LLCs, S-corporations, partnerships, and certain trusts. That covers the overwhelming majority of Florida's small business landscape — roughly 95% of U.S. businesses are pass-throughs, and Florida's entrepreneur-heavy economy skews even higher.
The Big News: QBI Is Now Permanent
Before OBBBA, Section 199A was set to expire on December 31, 2025. Business owners and their accountants were running dual-scenario projections: one with the deduction, one without. The without-it scenario was ugly — a typical Florida pass-through owner earning $150,000 in QBI faced an extra $6,000–$9,000 in federal tax if the deduction lapsed.
OBBBA erased that cliff. Section 199A is now permanent, which means:
Long-horizon planning is back — Multi-year strategies (entity choice, retirement plan design, real estate depreciation schedules) can now assume QBI will be there.
Entity conversion math changed — Many LLCs that were considering C-corp conversion to "lock in" the 21% flat corporate rate no longer need to. The pass-through rate remains competitive.
Retirement contribution strategy benefits — Because retirement contributions reduce QBI but also reduce taxable income, the long-term math of SEP-IRAs and Solo 401(k)s just got cleaner.
2026 Thresholds and Phase-Outs
QBI isn't automatic — it phases out based on taxable income, and the rules differ depending on whether your business is a "Specified Service Trade or Business" (SSTB). SSTBs include health, law, accounting, consulting, financial services, and any business where the principal asset is the reputation or skill of its employees.
| 2026 Filing Status | Full Deduction Below | Phase-Out Ends At | Phase-In Range |
|---|---|---|---|
| Single / HoH | $201,775 | $276,775 | $75,000 |
| Married Filing Jointly | $403,500 | $553,500 | $150,000 |
| Married Filing Separately | $201,775 | $276,775 | $75,000 |
Below the lower threshold, the math is clean: deduct 20% of QBI, subject only to a 20%-of-taxable-income overall cap. Above the upper threshold, non-SSTB businesses become subject to a W-2 wage and unadjusted basis test — and SSTBs get cut off entirely.
The phase-in ranges increased under OBBBA. For 2025, the phase-in was $100,000 (MFJ) and $50,000 (all others). For 2026, those amounts expanded to $150,000 and $75,000 respectively. That change alone extends the full deduction deeper into high earners than the original 2017 law allowed.
New in 2026: The $400 Minimum Deduction
Here is an often-overlooked OBBBA addition that kicks in for tax years beginning in 2026: a new minimum QBI deduction. If you have at least $1,000 of QBI from one or more trades or businesses in which you materially participate, you are guaranteed at least a $400 deduction — even if the regular calculation would otherwise reduce your benefit.
For side-hustlers, freelance consultants, and part-time business owners with modest QBI, this provision essentially puts a floor under the deduction. That $400 floor will be inflation-adjusted in future years.
The S-Corp Salary Trade-Off
For Florida S-corp owners, the permanence of QBI sharpens one of the classic planning questions: how much should I pay myself in W-2 wages versus take as distributions? Salary is subject to payroll tax and excluded from QBI. Distributions are QBI-eligible but do not build W-2 wage base for the upper-threshold limitation.
The IRS requires "reasonable compensation" regardless — you cannot just zero out salary. But above the income threshold, you may actually need more wages (yours or employees') to preserve the deduction, because the deduction above the phase-out becomes limited to the greater of 50% of W-2 wages or 25% of wages plus 2.5% of qualified property basis.
SSTB Owners: Watch the Cliff
If you run an SSTB — a Florida financial planning practice, a medical clinic, a small law firm, a consulting shop — and your taxable income is climbing toward the phase-out, the math gets sharp. Once you cross $276,775 single or $553,500 joint, your QBI deduction disappears entirely. For someone sitting at $280,000 single with $200,000 of QBI, that cliff is worth about $10,000 a year.
The planning play: shift income below the threshold. Retirement contributions (SEP, Solo 401(k), defined benefit plan), HSA contributions, charitable gifts from a donor-advised fund, and deferring year-end invoices into January can all push you under the cliff.
Your QBI Permanence Checklist
1. Confirm your entity type qualifies — Pass-throughs (sole props, LLCs, partnerships, S-corps) qualify. Regular C-corps do not. If you incorporated as a C-corp in the last few years "just in case" QBI sunset, now is the time to revisit whether that was optimal.
2. Project your 2026 taxable income versus the thresholds — If you'll be within $25,000 of a phase-in threshold, small moves (retirement contributions, timing of income or deductions) can preserve thousands in QBI benefit.
3. Track W-2 wages and qualified property — For non-SSTBs above the upper threshold, the deduction depends on wages paid and depreciable property basis. If you're close, front-loading a 2026 equipment purchase or a key hire can restore the deduction.
4. Revisit S-corp reasonable comp — Set your 2026 salary with QBI in mind. Too low risks IRS reclassification; too high sacrifices QBI on the salary portion. The sweet spot is business-specific — run the numbers.
5. Lock in the new $400 minimum — Side-hustle LLC owners with $1,000+ of QBI: document material participation (hours logged, decisions made) to lock in the minimum deduction starting with your 2026 return.
6. Update multi-year cash flow models — Remove the "QBI sunset" contingency from your 2026+ projections. The permanence of the deduction should shift assumptions on reinvestment, compensation, and retirement planning.
7. Talk to your accountant before Q3 — Most QBI-driven moves (retirement plan adoption, entity conversion, wage restructuring) take time to implement and some require plan documents in place by specific deadlines. Starting in Q3 is tight; Q2 is ideal.
The Bottom Line for Florida Businesses
Florida has no state income tax, which means the QBI deduction's entire benefit flows straight through to federal tax savings — unlike business owners in high-tax states who see a diluted net impact. A Florida pass-through owner earning $150,000 of QBI keeps roughly $7,200 more in their pocket every year because of Section 199A. Over a decade, that is a $72,000 shift — enough to fund a retirement account, a down payment, or a real reinvestment in the business.
With QBI now permanent, that annuity is locked in. The question is no longer whether to plan around it, but how to maximize it.
At Accounting BOSS, we help Florida small business owners run the numbers on QBI thresholds, S-corp salary planning, and entity-choice decisions so no dollar of deduction is left on the table. If you want to know exactly how the new permanent rules affect your 2026 return — and what to do before the next estimated payment — schedule a conversation with our team. We'll map your situation to the thresholds, model the cliff risks, and build a plan you can act on this quarter.
