ACTEC Trust & Estate Talk

Episode: Qualified Business Income (QBI) Deductions Post-OBBBA

Date: September 23, 2025
Guest: Steve Goran, ACTEC Fellow, St. Louis, Missouri
Host: Travis Hayes, ACTEC Fellow, Naples, Florida

Episode Overview

This episode dives into the evolving landscape of the Qualified Business Income (QBI) deduction following the passage of the “One Big Beautiful Bill” (OBBBA). The discussion centers on how the new budget reconciliation law has modified the QBI deduction rules, with a focus on the expanded phase-in ranges and implications for pass-through business owners. The conversation offers practical insights, key considerations, and a touch of humor for wealth planners and tax professionals.

Key Discussion Points & Insights

1. Fundamentals of the QBI Deduction

• QBI allows qualified owners of pass-through businesses to deduct up to 20% of their qualified business income, reducing their effective tax rate.
• Original framework established by the 2017 Tax Cuts and Jobs Act.

Quote:
“It allows eligible taxpayers to deduct up to 20% of their qualified business income, otherwise known as QBI, which significantly reduces the business owner's effective tax rate.”
— Travis Hayes (00:38)

2. Two Major Limitations on QBI Deduction

• Wage Limitation: Deduction capped at the greater of either:
  • 50% of W-2 wages paid by the business; or
  • 25% of W-2 wages plus 25% of the business’s unadjusted basis immediately after acquisition (UBIA).

Quote:
“One of them is what we call the wage limitation... the greater of 50% of W-2 wages... or 25% of wages plus 25% of the unadjusted basis immediately after acquisition, which I abbreviate UBIA.”
— Steve Goran (01:16)

• Specified Service Trade or Business (SSTB) Disallowance:
  • Deduction is generally disallowed for income from certain service professions (health, law, accounting, consulting, etc.), except for engineers and architects.

Quote (humorous):
“We lawyers are evil people… whereas architects and engineers are doing God's work. They're good people. So that's why they get the full deduction.”
— Steve Goran (02:20)

3. Income Thresholds and Phase-In Ranges

• Wage limitation and SSTB disallowance do not apply if taxable income is below certain thresholds.
• 2025 Indexed Thresholds:
  • Married Filing Jointly (MFJ): $394,600
  • Other taxpayers: $197,300
• Full deduction below these levels.
• Phase-in applies to income between thresholds and upper limits, which previously were:
  • MFJ: $394,600–$494,600 (a $100,000 phase-in range)
  • Others: $197,300–$247,300 (a $50,000 range)

4. OBBBA Changes: Expanded Phase-In Ranges (Effective 2026)

• For 2026 & beyond:
  • MFJ phase-in range grows to $150,000
  • Other taxpayers’ range increases to $75,000
• With inflation adjustment, estimated ranges:
  • MFJ: Roughly $400,000–$550,000
  • Others: Roughly $200,000–$275,000

Quote:
“So you have a larger group of taxpayers that's going to be able to kind of benefit from that expanded range.”
— Steve Goran (05:02)

5. What Didn’t Change

• QBI Percentage Remains 20%:
  • Earlier legislative drafts proposed increasing it to 23%, but this was not enacted.
• Pass-Through Entity State Tax Deduction:
  • Remains available; potential limitations debated but not implemented.

Quote:
“Some earlier versions of the bill were going to increase it from 20% to 23% and those did not change it.”
— Steve Goran (06:11)

6. Lighthearted Moments & Quiz

• Steve interjects humor referencing “Die Hard” and a playful “pop quiz” to keep the topic engaging.

Memorable Moment:
“For those people who are fans of the movie Die Hard. You can substitute UBIA for yippee ki yay, but don't use the expletive afterwards.”
— Steve Goran (01:31)

“Now, of course, if you answer number two or number four, then I certainly love that answer. Number one, of course is the correct answer.”
— Steve Goran (06:06)

Important Segment Timestamps

| Timestamp | Segment Description | |-----------|-------------------------------------------------------------------------------------------| | 00:38 | Introduction to QBI, review of 2017 law | | 01:16 | Wage limitation and specified service business exclusion explained | | 03:45 | 2025 Indexed thresholds and phase-in range mechanics outlined | | 04:50 | OBBBA expansion of phase-in ranges for 2026+ | | 06:09 | Pop quiz and clarifications on what did/didn’t change in the new law | | 06:40 | Update on pass-through entity state tax deductions |

Key Takeaways

• The “One Big Beautiful Bill” expands the phase-in thresholds for QBI deduction limitations, allowing more taxpayers to benefit.
• The QBI deduction percentage stays at 20%—no increase to 23%.
• State pass-through entity tax deduction remains available despite past threats of limitation.
• Engineers and architects are still uniquely favored among service businesses for full QBI deduction eligibility.
• Practical impact for wealth planners: review client income levels against new, wider phase-in ranges for optimal QBI deduction planning.

For more expert analysis on trust, estate, and wealth planning issues, listen to the ACTEC Trust & Estate Talk podcast or consult ACTEC.org.