Pass-through business owners (sole props, partnerships, S-Corps, LLCs) can deduct up to 23% of qualified business income starting in 2026, permanently under the OBBBA. The deduction reduces effective tax rates significantly.
A consultant earning $200,000 in QBI deducts $46,000 (23%), saving $17,020 at a 37% rate — $2,220 more than under the old 20% rule.
The OBBBA (July 4, 2025) permanently extended and increased the QBI deduction from 20% to 23% starting in 2026. W-2 wage and property limitations still apply above income thresholds. Restructuring into an S-Corp can maximize the W-2 wage limitation.
A UNK client ran a plumbing business generating $180,000 in net income. His previous tax preparer had never mentioned the QBI deduction. Uncle Kam identified that he qualified for the full 23% deduction under the OBBBA — $41,400 off his taxable income. At his 22% marginal rate, this saved $9,108 in federal taxes. The deduction is now permanent, so the client is working with Uncle Kam to stack it with retirement contributions and S-Corp election for maximum benefit.
Own a pass-through business? The QBI deduction is now 23% and permanent. Book a call to confirm you're capturing the full amount.
Be the Next Win — Book a CallThe Qualified Business Income (QBI) deduction under Section 199A allows owners of pass-through businesses — sole proprietorships, S-Corps, LLCs, and partnerships — to deduct up to 23% of their qualified business income starting in 2026, permanently extended and enhanced under the OBBBA. The full deduction is available if taxable income is below approximately $197,300 (single) or $394,600 (married filing jointly).
Yes. S-Corp owners can claim the QBI deduction on their share of the S-Corp's qualified business income. However, W-2 wages paid to yourself as an S-Corp employee are not included in QBI — only the pass-through profit qualifies.
It depends on income. Consultants are classified as a "specified service trade or business" (SSTB), which means the QBI deduction phases out above approximately $197,300 (single) or $394,600 (married) in 2026. Below those thresholds, consultants get the full 23% deduction.
Yes — the OBBBA permanently extended and enhanced the QBI deduction, increasing it from 20% to 23% starting in 2026. It no longer faces a sunset date. This is one of the most significant permanent tax changes for self-employed individuals and pass-through business owners.
The basic calculation is 23% of your qualified business income, limited to the lesser of 23% of QBI or 50% of W-2 wages paid by the business (or 25% of W-2 wages plus 2.5% of qualified property). For most small business owners below the income thresholds, the calculation is simply 23% of net business income.
Pass-through business owners (sole props, S-Corps, LLCs, partnerships) can deduct up to 20% of qualified business income from taxable income. This is one of the largest tax breaks available to small business owners.
A business owner with $200,000 in QBI at a 24% rate: 20% deduction = $40,000 reduction in taxable income = $9,600 in tax savings.
Set to expire after 2025 — Congress may extend. Maximize by keeping income below phase-out thresholds. W-2 wage limitation applies above thresholds.
A UNK client earned $210,000 as an independent management consultant. He had heard of the QBI deduction but assumed his consulting work was a "specified service trade or business" (SSTB) that disqualified him. Uncle Kam analyzed the facts: management consulting is not on the IRS's SSTB list (which includes law, health, financial services, and performing arts — but not general consulting). Under the OBBBA, the client qualified for the full 23% QBI deduction: 23% x $210,000 = $48,300. At his 37% marginal rate, this saved $17,871 in federal taxes.
Self-employed or own a pass-through business? The QBI deduction could reduce your taxable income by 23% in 2026. Book a call to confirm you're capturing it.
Be the Next Win — Book a CallThe QBI deduction (Section 199A) allows owners of pass-through businesses (sole proprietorships, partnerships, S-Corps, and some trusts) to deduct up to 23% of their qualified business income from federal taxable income starting in 2026, permanently extended and enhanced under the OBBBA. Employees and C-Corp shareholders do not qualify.
SSTBs are businesses in fields like law, health, financial services, accounting, actuarial science, performing arts, consulting (in the narrow IRS sense), athletics, and brokerage services. For SSTB owners with income above the phase-out thresholds (approximately $197,300 single / $394,600 MFJ in 2026), the QBI deduction phases out completely. Below the threshold, SSTB owners get the full deduction. The "consulting" SSTB is narrowly defined — many business advisors and management consultants do not qualify as SSTBs.
For non-SSTB businesses, the deduction is limited to the greater of: (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. These limitations apply when taxable income exceeds approximately $197,300 (single) or $394,600 (MFJ) in 2026. Below these thresholds, the full 23% deduction applies without the W-2 wage limitation.
For S-Corp owners, the QBI deduction applies to the S-Corp's qualified business income — which is the net income after the owner's reasonable salary is deducted. The salary itself is not QBI. This creates a tension: a lower salary increases QBI (and the deduction) but also increases the W-2 wage limitation at higher income levels. Uncle Kam can model the optimal salary to maximize the combined QBI deduction and SE tax savings.
Yes — the OBBBA permanently extended and enhanced the QBI deduction, increasing it from 20% to 23% starting in 2026. It no longer faces a sunset date. This is one of the most significant permanent tax changes for self-employed individuals and pass-through business owners.
Deduct a portion of your home expenses (mortgage interest, rent, utilities, insurance, depreciation) based on the percentage of your home used exclusively and regularly for business.
A 200 sq ft office in a 2,000 sq ft home = 10% allocation. $30,000 in home expenses × 10% = $3,000 deduction, saving $1,110 at a 37% rate.
Actual expense method typically beats the simplified $5/sq ft method. S-Corp owners should use an accountable plan reimbursement instead of the home office deduction.
A UNK client worked fully remote as a freelance marketing director from a dedicated home office in her 1,800 sq ft Atlanta home. Her office was 180 sq ft — 10% of the home. Uncle Kam helped her calculate the actual expense method: $18,000 in rent × 10% = $1,800 in rent deduction, plus 10% of utilities ($480), internet ($180), and renter's insurance ($60). Total deduction: $2,520/year. After switching to a larger office space (240 sq ft = 13.3%), the deduction grew to $3,360. Combined with the simplified method comparison, the actual expense method won by $840/year.
Work from home? You may be leaving thousands in home office deductions on the table. Book a call to calculate your exact deduction.
Be the Next Win — Book a CallA home office must be used regularly and exclusively for business — a dedicated room or clearly defined space used only for work. A kitchen table where you occasionally work does not qualify. The space must be your principal place of business or where you meet clients.
No. The Tax Cuts and Jobs Act of 2017 eliminated the home office deduction for W-2 employees through 2025. Only self-employed individuals, freelancers, and business owners can currently claim the home office deduction.
You can deduct the business-use percentage of your internet bill. If your home office is 10% of your home's square footage, you can deduct 10% of your internet costs. If you use the internet exclusively for business (a separate business line), you can deduct 100%.
The simplified method allows you to deduct $5 per square foot of your home office, up to 300 square feet ($1,500 maximum). It is easier to calculate but often produces a smaller deduction than the actual expense method for most homeowners.
The home office deduction is not an automatic audit trigger. The IRS does scrutinize it, but a properly documented, legitimate home office is fully defensible. The key is the "exclusive use" requirement — the space must be used only for business, not as a guest room or general living area.
Business consultants working from home can deduct the home office space used exclusively for client work and business activities. A 300 sq ft office in a 2,500 sq ft home yields a 12% deduction of all home expenses — typically $4,000–$10,000 per year. Also deduct all office equipment, furniture, and technology used for consulting work under Section 179.
A business consultant using 15% of their home for consulting deducts $4,500/year in home office expenses, plus $3,000 in equipment, saving $2,775 at 37%.
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Business consultants can deduct MBA programs (if maintaining/improving current consulting skills), executive education programs, industry certifications (PMP, Six Sigma, Lean), and professional association dues (IMC USA, ACME). A consultant spending $15,000 on an executive education program directly related to their consulting specialty deducts the full amount.
A management consultant spending $5,000 on PMP certification, $3,000 on a consulting mastermind, and $2,400 on industry conferences deducts $10,400, saving $3,848 at 37%.
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The cost of developing coaching programs, courses, and client materials is fully deductible. This includes course creation software (Kajabi, Teachable, Thinkific), graphic design tools (Canva Pro), video editing software, and professional photography for marketing materials. A coach spending $5,000 building a signature program deducts the full amount in the year incurred.
A business coach spending $8,000 on course platform (Kajabi), $3,600 on video production, $2,400 on graphic design, and $1,200 on copywriting deducts $15,200, saving $5,624 at 37%.
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High-ticket masterminds, business coaching programs, and professional development investments are deductible when directly related to your coaching or consulting practice. A $10,000 mastermind investment is fully deductible as a business education expense under IRC §162. Also deduct books, online courses, podcasting equipment, and conference attendance.
A business consultant paying $12,000/year for a mastermind, $3,000 for ICF coaching certification, and $2,400 for business conferences deducts $17,400, saving $6,438 at 37%.
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Business consultants can deduct 100% of travel costs (flights, hotels, rental cars) when traveling to client sites, and 50% of business meals with clients. A consultant flying to client engagements 20 times per year can deduct $15,000–$30,000 in travel expenses. Keep records showing the business purpose and client name for every travel and entertainment expense.
A business consultant traveling to client sites spending $15,000/year on flights, hotels, and rental cars deducts $15,000 (plus 50% of $4,000 in meals = $2,000), saving $6,290 at 37%.
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Deduct business vehicle expenses using the standard mileage rate or actual expenses (depreciation, gas, insurance, repairs). Section 179 and 100% bonus depreciation allow full expensing of heavy SUVs and trucks in Year 1.
Driving 20,000 business miles at 72.5¢/mile = $14,500 deduction. A $80,000 SUV over 6,000 lbs can be fully expensed under 100% bonus depreciation, saving $29,600 at 37%.
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Deduct ordinary and necessary travel expenses when traveling away from home for business, including transportation, lodging, and 50% of meals.
A business owner spending $15,000/year on travel (flights, hotels, meals) deducts $13,500 (meals at 50%), saving $4,995 at a 37% rate.
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S-Corp shareholders pay payroll taxes only on their "reasonable salary," not on all business profits. Distributions above the salary avoid 15.3% self-employment tax.
A business earning $300,000 net. Salary set at $80,000 (reasonable). Distributions: $220,000. SE tax savings: $220,000 × 15.3% = $33,660/year.
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Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) allow small businesses to reimburse employees for individual health insurance premiums and medical expenses tax-free.
A business owner reimbursing 5 employees $500/month each: $30,000 in annual reimbursements are fully deductible, saving $11,100 at a 37% rate vs. paying after-tax.
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Deduct 50% of the cost of business meals where there is a genuine business discussion. The meal must not be lavish, and the business purpose must be documented.
Spending $20,000/year on business meals = $10,000 deduction, saving $3,700 at a 37% rate.
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Small businesses with 100 or fewer employees receive a tax credit of up to $5,000 per year for 3 years for the costs of starting a new retirement plan, plus an additional credit for employer contributions.
A 10-person company starting a 401(k) receives $5,000/year for 3 years = $15,000 in direct tax credits, covering most of the setup and administration costs.
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Establish a formal accountable plan to reimburse employees (including owner-employees) for business expenses tax-free. The business deducts the reimbursement; the employee pays no income or payroll tax on it.
An S-Corp owner with $15,000 in home office, vehicle, and phone expenses reimburses through an accountable plan, saving $5,550 in combined income and payroll taxes.
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Many states allow S-Corps and partnerships to elect to pay state income tax at the entity level, generating a federal deduction that bypasses the $10,000 SALT cap for individual owners.
An S-Corp owner in California paying $50,000 in state income tax: PTET election moves $40,000 above the SALT cap to a federal deduction, saving $14,800 at a 37% rate.
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A dollar-for-dollar tax credit for qualified research expenses including wages, supplies, and contract research. Startups can apply up to $500,000/year against payroll taxes.
A software company spending $500,000 on R&D wages qualifies for a $50,000–$100,000 federal tax credit, dollar-for-dollar against taxes owed.
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A business owner creates their own insurance company to insure business risks. Premiums paid to the captive are deductible by the business; the captive pays tax only on investment income under §831(b).
A business paying $1.2M in captive premiums deducts the full amount, saving $444,000 at a 37% rate. The captive pays minimal tax on investment income.
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Hire your children or spouse in your business to shift income to lower tax brackets. Children under 18 working for a sole proprietorship or partnership owned by parents are exempt from FICA taxes.
Paying a 16-year-old child $15,750/year (2026 standard deduction): $0 federal income tax for the child, $15,750 deduction for the business, saving $5,828 at a 37% rate.
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Employers who provide or pay for childcare facilities for employees receive a tax credit of 25% of qualifying childcare expenditures and 10% of childcare resource and referral expenditures, up to $150,000/year.
An employer spending $500,000 on an on-site childcare facility receives a $125,000 tax credit (25%), plus the remaining $375,000 is deductible.
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Deduct up to $5.00 per square foot for energy-efficient improvements to commercial buildings, including HVAC, lighting, and building envelope upgrades.
A 50,000 sq ft commercial building with qualifying improvements generates $250,000 in deductions, saving $92,500 at a 37% rate.
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The QBI deduction gives consultants a 23% discount on all net business income starting 2026 — most independent advisors never claim it because they assume it only applies to product businesses.
An S-Corp election can save consultants $10,000–$30,000/year in self-employment taxes — the single highest-ROI structural move for anyone billing over $50,000/year.
Every software subscription, professional development course, and client-related travel expense is 100% deductible — most consultants undercount these by $5,000–$15,000/year.
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