QBI Deduction Guide for Construction, Retail and Logistics

How Construction, Retail, and Logistics Businesses Can Claim the 20 Percent IRS QBI Deduction

I’ve reviewed thousands of tax returns for construction crews in Cypress, retail shops in Katy, and logistics operations around the Spring area. Most owners I meet are leaving 20% of their business income on the table because they don’t understand the QBI deduction. This guide will show you exactly how it works for your industry and how to claim it without IRS issues.

Overview

Here’s the simple version: if you own a construction company, logistics operation, or retail store as a pass-through business (sole proprietorship, LLC, partnership, or S corp), you can deduct up to 20% of your business income. Once your income crosses about $191,950 as a single filer or $383,900 married, you have to prove you’re not in a service business like accounting or law. That’s when the rules get tighter, and that’s where most owners get stuck.

What Is the QBI Deduction?

The QBI deduction is Section 199A of the tax code, and it’s one of the biggest wins for small business owners. You get to deduct 20% of your qualified business income directly from your taxable income.

This works for pass-through businesses. That means sole proprietorships, LLCs, partnerships, S corps, and some trusts. If you’re a C corporation, this doesn’t apply to you.

Let me give you a real example. A commercial remodeling contractor in Pearland pulls $150,000 in qualified business income. That contractor gets to deduct $30,000 from taxable income. That’s real money back on your tax bill.

Who Qualifies as a Non-SSTB?

Here’s where your industry matters. The IRS divides businesses into two buckets: service businesses and non-service businesses. If you’re an accountant, lawyer, or doctor, you’re in the service bucket and the deduction gets complicated at higher incomes.

If you build things, sell products, or move goods, you’re golden. You keep the deduction even when your income gets high. I work with construction companies, remodeling crews, retail shops, and freight operations all over the Houston area, and they all get cleaner tax treatment than service businesses. That’s a major advantage for you.

Income Thresholds: When Limitations Begin

The IRS has a trigger point. Below it, you don’t have to prove anything. Above it, you have to show your wages and equipment to keep the deduction.

For 2025, that trigger is $191,950 for single filers and $383,900 married filing jointly. These numbers go up slightly every year for inflation. If you’re under these thresholds, congratulations. You can claim the full 20% deduction and stop reading this section.

How to Preserve the Deduction at Higher Income Levels

How to Keep Your Deduction Above the Thresholds

The Wage Rule

This is the first gate. You have to pay W-2 wages to your employees. The deduction caps out at the greater of two numbers: 50% of your W-2 wages, or 25% of W-2 wages plus 2.5% of your equipment and property value.

The Equipment and Property Rule

UBIA is tax language for the original price of equipment and property you bought. If you spent $50,000 on a bucket truck, that counts. If you bought machinery for $100,000, that counts. If you own the building your retail store sits in, that counts. Land by itself doesn’t count, and inventory doesn’t count. But anything you use to run your business that still has value counts.

Real-World Examples from Houston

Construction Firm in Spring

Owner pulls $250,000 profit, pays crew members $100,000 in W-2 wages, and has $150,000 in tools and equipment. The wage test gives 50% of wages, which is $50,000. The property test gives 25% of wages ($25,000) plus 2.5% of equipment ($3,750), totaling $28,750. The construction owner can use up to $50,000 for the deduction limit because it’s the higher number.

Retail Store in Katy

Profit of $300,000, payroll of $75,000, and $25,000 in store fixtures and equipment. The wage test maxes at $37,500. The property test maxes at $18,750 plus $625, totaling $19,375. The store owner uses $37,500 as the limit.

Logistics Operation in the Cypress Area

Profit of $500,000, payroll of $200,000, and fleet vehicles worth $500,000. The wage test is $100,000. The property test is $50,000 plus $12,500, totaling $62,500. The logistics owner uses $100,000 as the limit.

Why This Breaks Down for Most Owners

I’ve seen plenty of contractors and retail owners lose this deduction because their books are messy. The IRS doesn’t take your word for it. Your general ledger has to match your tax return. Your W-2 filings have to match your payroll records. Your equipment purchases have to be documented and tracked for depreciation.

I also see owners who picked the wrong entity structure years ago. If you’re operating as a C corporation, you don’t get this deduction at all. If you set up an S corp but never made the election official, things get complicated. Your business structure decision either opens this door or closes it.

What You Need to Do Monday Morning

Get your books in order. Pull your general ledger and compare it to your business bank statements. Fix anything that doesn’t match. Start tracking your equipment purchases by year and cost. Make sure your payroll records match what you filed with the IRS.

If you’re above the income threshold, run the numbers. Add up your W-2 wages paid and your equipment value. Check whether you’re keeping the full deduction or hitting the wage limit. That number changes how much you actually save.

Then schedule time in November or December to plan. The QBI deduction isn’t just a filing issue. It’s a strategy issue. Every business is different.

How I Can Help You

I’ve worked with hundreds of construction crews, retail shops, and logistics operations around Houston. I help owners like you set up the right structure, clean up messy books, and capture deductions you’re actually entitled to claim.

Here’s what we do. We audit your business structure and make sure you’re getting the best tax treatment. We review your bookkeeping to catch missing or duplicate entries that could cost you deductions. We track your equipment and compute UBIA correctly. We run the QBI numbers in November and tell you exactly what you’ll save.

If you’re running a construction, logistics, or retail operation in Cypress, Katy, Spring, Pearland, or anywhere else in the Houston area, reach out.

Contact EZQ Group today to schedule a 30-minute QBI review.