The Qualified Business Income deduction lets most self-employed people deduct 20% of their business profit before income tax. Here's who qualifies and what changed in 2025.
The QBI deduction allows eligible self-employed individuals to deduct **20% of their qualified business income** from federal income taxes.
Originally set to expire in 2025, the **One Big Beautiful Act signed July 4, 2025** made it permanent.
**Example:** Business earns $60,000 net profit → deduct $12,000 → in 22% bracket → **$2,640 you don't pay**.
Most solo founders, freelancers, and creators qualify — software developers, designers, writers, coaches, consultants, creators.
For **Specified Service Trade or Business (SSTB)** owners (law, health, consulting, financial services, performing arts), the deduction phases out at:
Below the threshold = full deduction. Above = phases out.
For non-SSTB businesses (most tech founders, product creators, e-commerce) — no industry-based phase-out applies for most small businesses.
File **Form 8995** (or 8995-A for complex situations) with your tax return. Most tax software handles this automatically.
The QBI deduction is the most underutilized tax break for self-employed people. If you're earning business income and not claiming it, you're overpaying the IRS. It's permanent now. Learn it, claim it, keep more of what you earn.
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