Business Deductions

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.