If you own your practice or are a partner in one, January 1st, 2026 brought you some genuinely good news that might have gotten lost in all the other tax headlines.

The Qualified Business Income (QBI) deduction (that 20% deduction for pass-through business income that’s been saving practice owners tens of thousands of dollars annually since 2018) is now permanent.

No more wondering if it’s going away. No more planning around potential sunsets. No more uncertainty about whether you’ll still have this deduction in five years.

It’s here to stay.

But here’s the thing: just because it’s permanent doesn’t mean you’re automatically maximizing it. And for practice owners in Northwest Ohio and Southeast Michigan, understanding how to optimize this deduction could mean the difference between leaving $20,000 on the table and keeping it in your pocket.

What the QBI Deduction Actually Does

Let’s start with the basics, because I’ve found that many practice owners know they get “some kind of deduction” but aren’t entirely clear on how it works.

If you own your practice as a sole proprietorship, partnership, S-corporation, or LLC, you potentially qualify for a 20% deduction on your qualified business income. This is a deduction from your taxable income…not a credit, not a business expense, but an actual reduction in what you pay taxes on.

For a practice owner earning $400,000 in qualified business income, that’s potentially an $80,000 deduction. At a 32% marginal tax rate, that’s over $25,000 in tax savings annually.

That’s real money. And now you know you’ll have access to this deduction for as long as you own the practice.

The Complexity Begins with the Details

Here’s where it gets more complicated. Not all business income qualifies equally, and several limitations kick in at certain income levels.

The income thresholds matter. For 2026, if your taxable income is below $201,775 (single) or $403,550 (married filing jointly), you generally get the full 20% deduction with minimal restrictions. Once you exceed those thresholds, limitations start phasing in over a $75,000 range for single filers and $150,000 range for joint filers.

Your type of business matters. If your practice is classified as a Specified Service Trade or Business (SSTB) which includes health, law, accounting, consulting, and several other professional services you face additional restrictions once you exceed the income thresholds. Medical and dental practices are almost always SSTBs.

W-2 wages and property basis create alternative limits. Once you’re above the threshold, your QBI deduction is limited to the greater of: (1) 50% of W-2 wages paid by the business, or (2) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. This is where things get technical, and it’s also where practice structure starts to matter significantly.

Why Practice Structure Matters More Now

With the QBI deduction now permanent, the question of how your practice is structured deserves a fresh look.

Are you a sole proprietor? An S-corporation? A partnership? Each structure has different implications for QBI optimization.

S-corporation owners need to think carefully about the balance between reasonable W-2 compensation to themselves and the pass-through income that qualifies for QBI. Pay yourself too little as W-2 wages, and the IRS has issues. Pay yourself too much, and you reduce the income eligible for the QBI deduction. There’s a sweet spot, and it depends on your specific numbers.

Partnership structures face different calculations, especially if you have multiple partners with varying compensation levels and ownership percentages.

The timing of equipment purchases now has permanent QBI implications. Because the unadjusted basis of qualified property factors into one of the limitation calculations, the decision about when to purchase major equipment (imaging systems, surgical equipment, practice build-outs) has tax planning implications that extend beyond just depreciation.

What Changed with the OBBBA

The One Big Beautiful Bill Act didn’t just make the QBI deduction permanent. It also modified some of the mechanics.

The income ranges over which the limitations phase in were expanded slightly. This gives more practice owners breathing room before the full restrictions kick in.

The phase-in range for limitations increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for married filing jointly. This might sound technical, but it means the “cliff” where you suddenly lose significant portions of the deduction is now a gentler slope.

For practice owners whose income bounces around that threshold range from year to year which is common with variable reimbursement, partnership distributions, or practice growth; this creates more predictability and easier planning.

Common Mistakes Practice Owners Make

Over the years working with medical and dental practice owners in our area, I’ve seen several recurring mistakes:

Assuming the deduction is automatic. It’s not. You need to calculate it correctly, track the right numbers, and structure things appropriately. I’ve seen practice owners lose out on tens of thousands because they assumed their tax preparer was optimizing this when they weren’t.

Not coordinating with payroll decisions. The W-2 wage limitation means your payroll strategy directly affects your QBI deduction. These decisions need to be made together, not separately.

Ignoring the impact of retirement plan contributions. Contributions to SEP-IRAs, solo 401(k)s, or defined benefit plans reduce your taxable income, which can help you stay under the threshold where QBI limitations kick in. But you need to coordinate these strategies.

Failing to document business use of property. If you’re using the qualified property basis calculation to maximize your deduction, you need documentation. The IRS is clear about this.

Making entity structure decisions without considering QBI. I’ve seen practice owners switch from S-corp to C-corp for other reasons without realizing they’re giving up the QBI deduction entirely. These decisions have consequences.

What You Should Be Thinking About

Now that the QBI deduction is permanent, several planning questions deserve your attention:

Is your current practice structure optimized for QBI? Just because you set up your S-corporation ten years ago doesn’t mean it’s still the right structure today.

Are you paying yourself the right W-2 wage? Too high and you lose QBI. Too low and you trigger IRS scrutiny. There’s a calculation to find the optimal number.

Are you tracking the right metrics? To maximize QBI under the wage and property limitations, you need to know your W-2 wages paid, your unadjusted basis in qualified property, and how these numbers interact with your income levels.

Do you have planned equipment purchases that should be timed strategically? With the deduction now permanent, multi-year planning around major capital investments makes sense in ways it didn’t when we didn’t know if QBI would survive.

If you’re considering bringing in a partner or selling the practice, how does QBI factor into the structure? Partnership agreements, buy-ins, and succession planning all have QBI implications now that we know the deduction isn’t going anywhere.

The Bottom Line for Practice Owners

The QBI deduction being permanent is unambiguously good news for practice owners. It provides certainty, enables long-term planning, and represents significant tax savings that you can now count on indefinitely.

But “permanent” doesn’t mean “automatic.” And it definitely doesn’t mean “simple.”

The practice owners who benefit most from this deduction are the ones who understand how it works, structure their practices appropriately, coordinate their compensation decisions with their QBI strategy, and make intentional choices about timing and structure.

If you own a medical or dental practice in Northwest Ohio or Southeast Michigan, the QBI deduction should be part of your annual tax planning conversation. Not an afterthought. Not something your tax preparer handles in April. A strategic element that influences decisions you make throughout the year.

If you’d like to discuss whether your practice structure is optimized for QBI, or if you’re not sure you’re getting the full benefit of this deduction, that’s exactly the type of conversation I have with practice owners regularly.

Feel free to reach out via phone, email, or schedule a time to talk. Let’s make sure you’re keeping as much of your hard-earned income as possible especially now that we know this deduction is here to stay.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Ruiz Financial Group LLC does not offer tax advice or tax preparation services.