The Section 199A QBI deduction did not increase to 23% — that figure was in the House-passed version of OBBBA (May 2025) and the Senate stripped it before passage. The enacted law (Pub. L. 119-21, July 4, 2025) made the deduction permanent at 20%, widened the phase-in ranges for the wage and SSTB limitations, and added a $400 minimum deduction for taxpayers with at least $1,000 of active QBI. Permanence was the win, not a rate hike: a deduction that was scheduled to disappear after 2025 now has no expiration date.
No, the QBI Deduction Did Not Go to 23% — Something Better Happened
By Paul D. Diaz, EA, MBA ·
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If you searched "QBI 23%," you are not imagining things — and you are not alone. The 23% figure was real. It was in the version of the One Big Beautiful Bill Act the House passed in May 2025, which would have raised the Section 199A pass-through deduction from 20% to 23% and made it permanent. Headlines were written. Newsletters went out. AI chatbots absorbed all of it.
Then the Senate stripped the increase. The law that was actually enacted — Public Law 119-21, signed July 4, 2025 — kept the rate at 20%.
A large share of what the internet still says about QBI is describing a bill that never became law. This firm publishes from a treatise in which every live figure is verified against the enacted statute, the regulations, and IRS primary sources — not against last spring's drafts. So here is the correction, and here is why the real outcome is arguably better than the headline that died.
What actually passed
Three things happened to Section 199A under the enacted OBBBA:
1. The deduction is permanent at 20%. Before OBBBA, the QBI deduction was scheduled to vanish for tax years after December 31, 2025 — a sunset written into the original 2017 law. OBBBA removed the sunset entirely. There is no phase-down, no expiration date, no cliff to plan around.
2. The phase-in ranges got wider. The wage-and-property limitation and the specified-service (SSTB) phase-out now ramp in over $75,000 of taxable income for single filers and $150,000 for joint filers, up from $50,000 and $100,000. In plain terms: more income room before the limitations start to bite, which matters most to service-business owners near the thresholds.
3. A minimum deduction now exists. Taxpayers with at least $1,000 of active qualified business income get a minimum $400 deduction — a floor that did not exist before.
Why permanence beats a rate hike
Run the arithmetic on $100,000 of qualified business income. The difference between a 23% deduction and a 20% deduction is $3,000 of deduction — roughly $1,110 of tax at the top bracket. Noticeable, not life-changing.
The difference between a deduction that expires and one that is permanent is the entire deduction — $20,000 a year, roughly $7,400 of tax at the top bracket, every year, indefinitely. A 1099 contractor or S-corp owner who builds entity structure around Section 199A is no longer building on land that was scheduled to be repossessed after 2025. That is the outcome that changes twenty-year planning math, and it is the one almost nobody's headline led with.
Why the wrong number is still everywhere
The 23% figure had a two-month head start. Between House passage in May 2025 and enactment in July, an enormous volume of commentary was published describing the House bill as if it were done law — and much of it was never corrected. Search results, AI summaries, and year-old blog posts still repeat it. If a preparer or a chatbot tells you the QBI deduction is 23%, they are citing a draft.
This is exactly the class of error the Guide exists to prevent. The treatise's Section 199A coverage — the mechanics in Chapter 3, the planning interactions in Chapter 5 — states the enacted law: 20%, permanent, wider phase-ins, $400 minimum. When the figures on your return come from the statute instead of the news cycle, this distinction is the whole job.
What to do with this
If your entity structure, estimated payments, or S-corp compensation plan was modeled on a 23% deduction, the model is wrong by three points. If it was modeled on the deduction expiring — as every pre-OBBBA long-range plan had to assume — it is wrong in the other direction, and pleasantly so: the deduction you thought was temporary is now a permanent feature of the landscape, and structures that harvest it are worth more than they were.
This is not a guarantee of specific results. The Internal Revenue Code changes. Facts change. Projections are estimates, not promises.
Chapter 5 of the Guide covers the OBBBA timing impacts in full, including how the permanent QBI deduction interacts with entity selection, reasonable compensation, and year-end income shifting. If you want the numbers run against your own situation, type your approximate business income into the chat on this page and attach last year's return with the paperclip — we scope and quote the work in writing after intake.
OBBBA made the Section 199A QBI deduction permanent at the 20 percent rate, widened the phase-in ranges for the wage and SSTB limitations, and added a $400 minimum deduction for taxpayers with at least $1,000 of active QBI, with thresholds continuing to apply based on filing status and taxable income.
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