How Small Businesses Should Position to Benefit from the Qualified Business Income (QBI) Deduction Under the One Big Beautiful Bill Act (OBBBA)

Small and medium business owners in the Chicagoland area face constant challenges navigating ever-changing tax regulations. One major development is the “One Big Beautiful Bill Act,” or OBBBA, signed into law in 2025. This legislation significantly enhances the Qualified Business Income (QBI) deduction, turning it into a key opportunity for businesses.

Below is an overview of what OBBBA changed and practical ways your small business can position itself to take advantage.

OBBBA: What’s New for QBI?

• Permanent Deduction: The 20% QBI deduction (which was set to expire in December 2025) is now permanent, so you can plan around it long-term.
• $400 Minimum Deduction: Even side hustles or small startups with at least $1,000 in QBI and material participation get a simple, guaranteed $400 deduction.
• Wider Phase-In Ranges: High-earning businesses, especially service fields like consulting, healthcare, or law, have more room to qualify before losing benefits.

Refresher: What Is the Qualified Business Income (QBI) Deduction?

The QBI deduction allows eligible businesses such as sole proprietorships, partnerships, S corporations, and certain trusts to deduct up to 20 percent of their qualified business income. This allows owners to reduce their taxable income without itemizing.

Since QBI is based on net income (gross revenue minus business expenses), proper classification and expense reporting are critical.

Steps to Maximize Your Tax Benefits Under OBBBA

To position your business effectively and maximize your benefits under the new legislation, consider the following strategies:

1. Choose or Maintain a Qualifying Structure

Only pass-through income qualifies for QBI. If you are currently a C corporation, you may want to consider opting for pass-through status. For example, converting a small LLC to an S-corp election can help if it aligns with your operations. However, always consult a tax advisor to avoid unintended consequences like shifts in self-employment tax.

2. Classify Income and Activities Properly

Ensure your business meets the “trade or business” definition under IRC Section 162. This typically requires material participation, such as working at least 500 hours annually or being the primary operator. You can maximize QBI by segregating qualifying income from non-qualifying sources, like investment income or guaranteed payments.

3. Leverage Wage and Asset Strategies

If your business exceeds phase-out limits, you can still boost your deduction cap. Strategies include:

• Increasing W-2 Wages: Hire new staff or reclassify owner compensation.
• Investing in Assets: Purchase depreciable assets. The deduction limit is the greater of 50 percent of wages or 25 percent of wages plus 2.5 percent of qualified property.

4. Integrate with Other OBBBA Perks

Don’t view QBI in a silo. Combine it with related provisions, such as the restored 100 percent bonus depreciation for equipment purchases or deductions for tips and overtime if your business involves service workers. These combinations can amplify your overall savings.

Stay Ahead of Tax Changes

With the potential to save thousands annually, such as $10,000 on $50,000 QBI, it is vital to track records meticulously. At JIL & Associates, we specialize in helping Chicagoland businesses navigate tax legislation like OBBBA while maximizing deductions like QBI.

When you started your business, handling your own finances made sense. You had a handful of transactions each month, and keeping track in a spreadsheet or app worked fine.

But as your business grows, DIY bookkeeping can quietly become a bottleneck, costing you time, money, and peace of mind.

Here are five clear signs it’s time to bring in professional bookkeeping help

Sign 1: You’re Spending Your “Off” Time on Bookkeeping

If you’re catching up on entries, reconciling accounts, or sorting through receipts on weekends or evenings, you’ve outgrown DIY bookkeeping.

Your time is valuable. Every hour spent on bookkeeping is an hour not spent on revenue-generating activities, serving clients, or strategic planning. Plus, rushed bookkeeping often leads to mistakes.

Sign 2: You’re Not Sure If You Made a Profit Last Month

You look at your bank balance, but that’s not the same as knowing your profit. Without accurate, up-to-date books, you’re making decisions in the dark.

Good bookkeeping gives you a clear picture of:

• Revenue trends — Are sales growing or declining?
• True profitability — What’s left after expenses?
• Cash flow position — Can you cover upcoming obligations?

If you can’t answer “How did we do last month?” with confidence, your books need attention.

Sign 3: Tax Season Feels Like a Crisis

If tax season means scrambling for documents, reconstructing records, or filing extensions because your books aren’t ready, you’re not alone. But it doesn’t have to be that way.

Businesses with clean, current books sail through tax season:

• No last-minute panic
• No paying for bookkeeping catch-up
• Tax planning happens throughout the year, not in April
• Fewer surprises (and a lower tax bill through proactive planning)

If filing your business tax return feels like an emergency project every year, it’s time to get your books under control.

Sign 4: Your Books Are Months Behind

Life gets busy. You tell yourself you’ll catch up on the books “next weekend.” But next weekend comes and goes, and now you’re 3, 6, or 12 months behind.

The longer you wait, the harder it gets:

• Bank statements become unavailable for download
• You forget what certain transactions were
• Receipts are lost or faded
• Errors compound and become harder to trace

If “catching up on the books” has been on your to-do list for more than a month, you need professional help. A bookkeeper can get you current and keep you there.

Sign 5: You’ve Had a Cash Flow Surprise

Cash flow surprises, realizing you can’t cover payroll, a tax bill, or a key expense, often stem from poor bookkeeping, not poor business performance.

When you don’t have accurate books, you might:

• Think you have more cash than you do (forgetting upcoming bills)
• Miss unpaid invoices sitting in accounts receivable
• Overlook recurring subscriptions or automatic payments
• Lose track of tax obligations

Professional bookkeeping gives you a real-time view of your cash position, so you can plan ahead and avoid stressful surprises.

Ready to Get Your Books Under Control?

Whether you’re a little behind or a lot behind, we can help you get caught up and set up a system that stays current all year.

At JIL & Associates, we provide straightforward bookkeeping services for small businesses, no judgment, no jargon, just clean books and clear financial insights.

📞 Call (630) 828-3648 or visit jiladvisors.com to schedule a free consultation.