Small Business Owners Rally Behind 20% Income Deduction

A new poll released by the National Federation of Independent Business (NFIB) reveals overwhelming support among small business owners for the 20% Small Business Deduction, a tax benefit that has significantly reduced income tax burdens since it was introduced under the 2017 Tax Cuts and Jobs Act (TCJA).

As Congress debated whether to make this deduction permanent, small business owners, CPAs, and tax professionals were closely watching. The One Big Beautiful Bill Act ultimately removed the scheduled expiration from IRC §199A, making the deduction permanent and delivering the outcome the small business community had lobbied for. This blog breaks down what the deduction is, who qualifies, and why this benefit has become a lifeline for entrepreneurs nationwide.

What Is the 20% Small Business Deduction?

The Section 199A deduction, commonly known as the Qualified Business Income (QBI) deduction, allows eligible owners of pass-through entities—including sole proprietors, LLCs, S-corporations, and partnerships—to deduct up to 20% of their qualified business income on their personal tax return.

For example, if a qualifying small business reports $100,000 in QBI, they may be able to deduct $20,000 before calculating their individual income tax liability.

Business owners structured as S-corporations should also be aware of the at-risk rules for partnerships and S-corporations, which interact with pass-through income and can limit the losses you are able to deduct.

The 20% figure is a ceiling, not a guarantee. Once taxable income exceeds the annual phase-in threshold, the deduction for any pass-through business is capped at the greater of 50% of the W-2 wages it pays or 25% of wages plus 2.5% of the unadjusted basis of its qualified property, and for a specified service trade or business (law, accounting, health, consulting, financial services, and similar fields), the deduction phases out entirely above the upper threshold. See IRC §199A(b)–(d) for the full limitation rules.

Key Poll Insights: Small Business Owners Want It to Stay

The NFIB's latest polling data reveals:

• 91% of NFIB members support permanently extending the 20% Small Business Deduction, according to an NFIB member ballot
• The deduction is credited with improving cash flow, enabling growth, and encouraging reinvestment
• Many respondents feared a significant tax hike if the deduction expired in 2025

These findings shaped the conversation in Congress, especially as lawmakers evaluated broader tax code revisions heading into the 2026 tax year.

Why It Matters for Your Business

If you own a small business, especially one structured as a pass-through entity, the 20% QBI deduction can provide:

1. Lower Effective Tax Rates

By reducing your taxable income, the deduction effectively lowers your personal income tax burden without changing your business structure.

2. Increased Reinvestment Potential

Many small business owners use tax savings to reinvest in staff, equipment, or expansion.

3. Predictable Planning Tools

Knowing this deduction is permanent helps with long-term financial forecasting and estimated tax payment planning under the extended TCJA framework.

How Bizora Supports Tax-Efficient Business Structuring

Whether you're launching a business or already running one, Bizora helps you:

• Understand entity formation and how it impacts QBI eligibility
• Coordinate with your CPA or tax advisor to track qualified income
• Stay compliant with evolving tax laws
• Plan proactively for the long term now that the deduction is permanent

Take Action: Plan Ahead for 2026 and Beyond

Now that the 20% Small Business Deduction has been made permanent, it's an ideal time to work with a tax professional to optimize your entity structure and maximize this benefit year after year.

Visit bizora.ai to learn more about our small business compliance tools and how we work with CPAs to optimize your financial outcomes.