Good morning. The biggest tax break most trade-shop owners get almost disappeared at the end of 2025. It didn't — it got made permanent instead. Here's what the 20% pass-through deduction is worth to you, and the one line in the rules that quietly favors the trades.
Top story: the 20% pass-through deduction is permanent now
If your shop is an S-corp, a partnership, an LLC or a sole proprietorship — not a C-corp — you can deduct up to 20% of your qualified business income before you figure your personal tax. That's the Section 199A deduction, and it was written to expire at the end of 2025. The One Big Beautiful Bill Act (P.L. 119-21, signed 4 July 2025) made it permanent and left the rate at 20% (per CPA firm GYF's §199A analysis).
What it's worth: on $300,000 of qualified business income, that's up to $60,000 knocked off the income you're taxed on — every year, not just this one. The headline isn't a new break; it's that the one you already had stopped being a year-to-year guess you couldn't plan around. This is separate from writing off a new truck (that's bonus depreciation, a different OBBBA provision) and separate from the overtime-and-tips break on your crew's pay — this one is on your business's profit.
Quick hits
Under the line, it's simple. For 2026, if your taxable income is below $201,750 (single) / $403,500 (joint), you generally take the full 20% with no wage test and no fine print (analysis of IRS Rev. Proc. 2025-32). Most one- and two-truck shops live here — the deduction just works.
Over the line, the trades win twice. Doctors, lawyers, accountants and consultants get phased out of the deduction at high income because they're "specified service" businesses. Building trades aren't — HVAC, plumbing, electrical and roofing are ordinary trades, so you keep the deduction above the threshold as long as you clear a W-2-wage test (broadly, the deduction is capped at 50% of the W-2 wages your business pays). OBBBA also widened the phase-in to $75,000 (single) / $150,000 (joint), so that cap bites more gently (GYF).
A new floor for the small and the side gigs. Starting in 2026 there's a $400 minimum deduction if you have at least $1,000 of qualified business income and you materially participate in the business — indexed for inflation after 2026 (GYF). It won't move the needle for a busy shop, but it's there for the smallest operators.
The Tip: run the threshold math before December 31, not in April
Two moves, one call with your CPA this quarter. One: if your taxable income is near that threshold ($201,750 / $403,500 for 2026), the usual year-end levers — timing December invoices and expenses, topping up a retirement plan — can keep you on the simple side of the line, where the full 20% is automatic. Two: if you're over it and you run as a sole prop or single-member LLC with no payroll, you can lose the deduction entirely — there are no W-2 wages for the cap to measure against. For a profitable shop above the threshold, that's the classic argument for electing S-corp status and paying yourself a reasonable W-2 wage; it's often what keeps the deduction alive. None of this is tax advice — it's the short list to put in front of the person who does your return.
Tool watch: [Not sponsored]
The IRS does the computation for you on Form 8995 (and Form 8995-A if your income is over the threshold) — both free on irs.gov, with instructions that spell out the wage test and what counts as qualified business income. Read those before you pay anyone to "optimize" your QBI; the form is the same math a preparer runs. We name no tax-software brand or CPA firm here on purpose — in an issue about a deduction, those are exactly the folks who'd pay to appear. No one paid for this mention.
That's the callout. See you next time.
The Callout — the business brief for the trades. We label every commercial placement: [Sponsor], [Affiliate], or [Not sponsored]. Today's Tool watch is our own honest read: no one paid for it, and the only things named are free IRS forms. 231J Ramparts Road, Te Anau 9600, New Zealand · Unsubscribe anytime. Nothing in The Callout is tax, legal or financial advice. Whether and how the Section 199A deduction applies to your business, your entity choice, and your year-end moves are decisions for you and your own CPA or tax adviser. This describes a general federal rule; your own facts and the current-year figures control the outcome.
Sources
GYF (Grossman Yanak & Ford LLP) — "Tax Planning Strategies: Section 199A (QBI) Deduction" (April 2026). States the OBBBA "made the QBI deduction permanent"; owners "deduct up to 20% of their qualified business income"; a $400 minimum deduction where QBI is at least $1,000 and the taxpayer materially participates, effective 2026; the wage/investment-limit phase-in ranges increase to $75,000 (single) / $150,000 (joint); 2026 phase-in thresholds $403,500 (joint) / $201,750 (single), phaseout complete at $553,500 / $276,750; SSTBs defined as reputation-or-skill fields (health, law, accounting, consulting), with construction listed among qualified (non-SSTB) trades. Read first-hand 9 October 2026. https://gyf.com/2026/04/tax-planning-strategies-section-199a-qbi-deduction/
Current Federal Tax Developments (Ed Zollars, CPA) — "2026 Inflation Adjustments for Tax Professionals: Revenue Procedure 2025-32 Analysis" (9 October 2025). 2026 §199A threshold amounts: $403,500 (married filing joint) / $201,750 (single and other) / $201,775 (married filing separate); phase-in/phaseout completion $553,500 / $276,750; notes OBBBA added "minimum deduction and QBI eligibility requirements for 2026 that will begin to adjust for inflation after 2026" (Code §199A(i)). The author flags these as read from the Rev. Proc. and advises confirming against the Revenue Procedure itself. Read first-hand 9 October 2026. https://www.currentfederaltaxdevelopments.com/blog/2025/10/9/2026-inflation-adjustments-for-tax-professionals-revenue-procedure-2025-32-analysis
One Big Beautiful Bill Act, P.L. 119-21, signed 4 July 2025 — the law that made §199A permanent (as cited by the analyses above, and consistent with The Callout's Issues 012 and 076, which cite the same Act for its other provisions). The 2026 thresholds ($201,750 single / $403,500 joint; phase-in range amounts $276,750 / $553,500) were re-read first-hand in IRS Rev. Proc. 2025-32 on 23 October 2026. IRS Form 8995 / 8995-A instructions: https://www.irs.gov/forms-pubs/about-form-8995-a
Load-bearing §199A facts were read first-hand on 9 October 2026 (US) from the two analyses above; the 2026 thresholds were re-confirmed against IRS Rev. Proc. 2025-32 on 23 October 2026 (NZDT).