What’s Going On with QBI in 2025?

If you own a law firm, a franchise, or any small business structured as an LLC, S-Corp, or partnership, you’ve probably heard of the Qualified Business Income (QBI) deduction — that 20% tax break that’s been a lifesaver for pass-through business owners since 2018.

Well, here’s the update: under the new One Big Beautiful Bill Act (aka the “Big Beautiful Bill”), those QBI deductions are here to stay — but with some tweaks, thresholds, and planning traps you’ll want to know about before tax season.

Let’s unpack what the Big Beautiful Bill QBI deduction changes 2025 mean for you in plain English — especially if you’re a professional (like an attorney) or running a service-based franchise.

 

First, a Quick Refresher: What Is the QBI Deduction?

The Qualified Business Income deduction allows eligible pass-through business owners — think sole proprietors, partnerships, LLCs, and S-corps — to deduct up to 20% of their qualified business income on their personal tax return.

It was created under the 2017 Tax Cuts and Jobs Act (TCJA) and was originally set to expire in 2025. Without renewal, millions of small business owners would’ve faced higher tax bills starting next year.

The Big Beautiful Bill changes that by making the QBI deduction permanent — but it also adjusts who qualifies and how much they can claim.

 

So, What Exactly Changed Under the Big Beautiful Bill?

1. The QBI Deduction Is Now Permanent

This is the big win. Under the previous law, QBI was set to sunset at the end of 2025. The Big Beautiful Bill locks it in permanently.

👉 Why it matters:

  • Long-term stability for pass-through entities.

  • Easier tax planning for firms and franchises.

  • No more worrying that your 20% deduction will disappear in a few years.

 

2. The Income Thresholds Have Shifted

While the deduction itself survives, the income phase-out ranges have been adjusted.

For 2025, the new ranges are higher but indexed differently to inflation, meaning high-earning professionals — especially those in Specified Service Trades or Businesses (SSTBs) like law, medicine, or accounting — might still phase out faster than before.

👉 For Attorneys:
 If your firm’s taxable income exceeds the new SSTB threshold (estimated around $450,000 for joint filers), you could see a reduced or eliminated deduction.

👉 For Franchise Owners:
 Most fast-food or retail franchises don’t count as SSTBs, so you can still claim the full 20% deduction as long as your total taxable income stays below the upper limit.

In short: attorneys may hit the income ceiling sooner, while franchise owners are likely to keep more of the benefit.

 

3. New Documentation Requirements for Pass-Throughs

The IRS is tightening documentation rules for who qualifies as a QBI-eligible entity.

👉 If you’re an attorney:
 Be ready to prove your firm’s status and confirm your income source breakdown (business vs. wages).

👉 If you’re a franchise owner:
 You’ll need to maintain clean books showing QBI-eligible income vs. non-eligible sources like dividends or investment returns.

Pro Tip:
 Make sure your bookkeeping software and chart of accounts are set up to track QBI income separately. If you’re not sure yours is — that’s something we can help with.

 

4. W-2 Wage and Property Limitations Still Apply

The QBI deduction is still limited by how much your business pays in W-2 wages or owns in qualified property.

  • If your business doesn’t have employees or assets, your deduction may shrink.

  • This affects solo attorneys or single-location franchise owners with small teams.

Example:
 A small law practice that pays $50,000 in W-2 wages can deduct less than a multi-unit franchise group paying $500,000 in wages.

Planning tip: Increasing legitimate payroll before year-end can boost your deduction.

 

5. Clarification on “Reasonable Compensation”

The Big Beautiful Bill emphasizes reasonable compensation for S-Corp owners — a common audit area.

If you pay yourself too little in salary and try to classify most income as “business profits” to maximize your QBI deduction, expect IRS scrutiny.

👉 For attorneys:
 Partners or managing members must ensure their pay aligns with industry norms.
 👉 For franchise owners:
 If you’re the owner-operator, your W-2 salary should reasonably reflect your role and hours.

 

6. Bonus for Multi-Entity Structures

Here’s a new perk: if you own multiple related pass-through entities, you can now aggregate income for QBI purposes more easily.

This means if you own several franchise locations, or your law firm has multiple PLLCs or management entities, you can combine QBI income to calculate one deduction — simplifying tax prep and maximizing the benefit.

 

What This Means for Attorneys

Attorneys fall into that tricky SSTB category, so the QBI deduction is a little less straightforward:

  • High earners in BigLaw or large partnerships may see limited benefits due to phase-outs.

  • Smaller or mid-sized firms may still get the full deduction.

  • Independent or solo practitioners stand to gain the most — especially those structured as S-Corps.

Takeaway: If you’re an attorney, this is the time to review your firm’s structure, compensation plan, and taxable income strategy to ensure you’re not losing out unnecessarily.

 

What This Means for Franchise Owners

Franchise owners — especially in food service — are typically in a stronger position to take full advantage:

  • You’re not considered an SSTB, so phase-outs hit later.

  • You likely pay W-2 wages (a key QBI factor).

  • If you own multiple locations, aggregation rules can amplify your deduction.

Takeaway: With careful bookkeeping and payroll planning, the Big Beautiful Bill QBI deduction changes 2025 could translate into substantial tax savings year after year.

 

Planning Ahead: How to Make the Most of the QBI Deduction

Here are a few practical steps:

  1. Review your business structure. If you’re still operating as a sole proprietor, consider whether an S-Corp or LLC election could improve your tax outcome.

  2. Track wages accurately. W-2 wages drive your deduction amount — don’t guess.

  3. Separate QBI and non-QBI income. Clean books make tax prep smoother (and protect you in an audit).

  4. Forecast income. If you’re near the SSTB limit, strategic retirement contributions or bonus timing can help you stay under the threshold.

  5. Get proactive help. Don’t wait until tax time — smart QBI planning happens year-round.

The Big Beautiful Bill gives pass-through business owners some long-term tax stability, but the details matter more than ever. Attorneys and franchise owners face very different QBI challenges — and one small misstep could mean losing out on thousands in deductions.


The bottom line? With the right strategy, you can turn these updates into lasting savings.

👉 We specialize in helping attorneys and franchise owners maximize the QBI deduction while keeping their books clean and audit-proof.

Contact us today to schedule a consultation and find out how the Big Beautiful Bill QBI deduction changes 2025 affect your specific business.