QBI Deduction Permanent for Real Estate & Construction

One of the most impactful provisions of the One Big Beautiful Bill Act (OBBBA) is the permanent extension of the Section 199A Qualified Business Income (QBI) deduction. Previously set to expire after 2025, the QBI deduction now remains a permanent feature of the tax code, offering long-term planning certainty for pass-through entities like S corporations, partnerships, and sole proprietorships.

The QBI deduction allows eligible taxpayers to deduct up to 20% of qualified business income. For the construction and real estate sectors, where partnerships and LLCs are common, this deduction significantly lowers effective tax rates and boosts after-tax returns on investment.

OBBBA not only makes the QBI deduction permanent, it also expands access. The phase-out thresholds have increased from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers, with future indexing for inflation.

This change means more high-income professionals in real estate and construction can benefit from the full deduction. Combined with smart tax strategies like income deferral, retirement contributions, and entity structuring, the impact is even greater. The bill also introduces a $400 minimum deduction for taxpayers with at least $1,000 in QBI, ensuring even small operators see a benefit.

The legislation preserves the eligibility of Real Estate Investment Trust (REIT) dividends for the QBI deduction. This is a win for investors and developers using vertically integrated structures, as it maintains tax-efficient access to income.

Construction firms operating as pass-through entities may also gain an edge when bidding for government contracts or private work, thanks to improved after-tax income and increased working capital for bonding and growth.

While the QBI deduction offers powerful planning opportunities, businesses must understand how to qualify and optimize their structure. At CSH, our advisors work closely with construction and real estate firms to ensure they’re leveraging every advantage, from entity formation and restructuring to REIT dividend planning and income allocation.