OBBBA makes permanent the deduction for qualified business income (QBI) under Section 199A of the Internal Revenue Code as enacted initially by the Tax Cuts and Jobs Act (TCJA) — generally equal to 20% of a non-corporate taxpayer’s aggregate QBI, subject to certain adjustments. A new minimum deduction of $400 per year, has been added for any noncorporate taxpayer whose aggregate QBI from all qualified trade or business activities in which the taxpayer materially participates exceeds $1,000.
PASS-THROUGH ENTITY TAX (PTET) DEDUCTION
Since the TCJA capped SALT deductions for individuals at $10,000, many states adopted PTET workarounds, which allowed pass-through entities to pay state income taxes at the entity level, rather than individual owners paying at the personal level, effectively reducing the pass-through entity’s income. Under OBBBA, the PTET deduction essentially remains the same as before.