QUESTION
What is the pass-through income deduction for businesses?
ANSWER
This deduction was set to expire at the end of 2025, but it was extended by the One Big Beautiful Bill Act (OBBBA). Owners of some pass-through businesses can continue to claim a deduction of up to 20% of qualified business income, plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.
The deduction phases out at $403,500—$553,500 (joint filers), $201,750–$276,750 (single filers), and $201,775— $276,775 (married filing separately—not including the qualified business income deduction. Above these thresholds, the deduction is based on whether you’re a specified service trade business (SSTB).