Sorry, W-2 Enthusiasts, Lawmakers Will Be Rewarding Self-Employment and Small Business Ownership Once More
W-2 employees might have a salary, benefits, and 401(k) match, but there’s one thing they don’t have — the Qualified Business Income deduction. And thanks to the backing of Congress, this ‘tax glitch’ for small business owners, independent contractors, and the self-employed is finding new life in the Republicans’ “One Big Beautiful Bill.”
- Since 2018, the Qualified Business Income (QBI) deduction has allowed operators of passthrough entities the option to write off 20% of their qualifying income — this deduction was set to expire at the end of 2025.
- However, the QBI is finding fresh life in the “OBBB” as Republicans seek to make the deduction permanent — with the House proposing a higher 23% deduction while the Senate seeks to maintain the 20% deduction.
What does that mean? So long as dollar-for-dollar deductions exist for business owners in 1099 land, many Americans might simply choose to write off losses rather than reclaim their profits using the QBI. But for those solopreneurs and independent contractors with low business expenses, the surviving QBI deduction is a consolation for the often frustrating self-employment tax. To that end, the continuation of this deduction will keep 1099 land looking attractive compared with its W-2 alternative.