QBI Aggregation Rules 2025: How to Group Entities for a Larger Tax Break

The Qualified Business Income (QBI) deduction, also known as Section 199A, has been a cornerstone of tax strategy for pass-through entity owners since its inception. With the passage of the One Big Beautiful Bill Act (OBBBA) in 2025, the landscape has shifted: this 20% tax break is no longer a temporary benefit but a permanent fixture of the U.S. tax code. For successful individuals and business owners with multiple entities, the most powerful tool to maximize this deduction is the aggregation election.

Aggregation allows you to treat multiple businesses as a single trade or business for the purpose of calculating the QBI deduction. This is particularly critical once your income exceeds the 2025 thresholds ($197,300 for single filers and $394,600 for married filing jointly), at which point the deduction becomes limited by W-2 wages paid and the unadjusted basis of qualified property (UBIA). By grouping entities strategically, you can share wages and property across your portfolio to unlock a significantly higher tax break.

Why Aggregation Matters: Overcoming Wage and Property Limits

For high-income earners, the QBI deduction is generally limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. A common problem occurs when one business is highly profitable but has few employees (e.g., a real estate holding company), while another has high wages but low profit (e.g., a management company).

If calculated separately, the profitable entity might have its 20% QBI deduction capped at zero because it pays no wages. However, if these entities are aggregated, the excess wages from the management company can be used to support the deduction for the profitable entity. According to the IRS instructions for Form 8995-A, aggregation essentially blends the QBI, wages, and property of all grouped businesses into a single calculation, often resulting in a far more favorable outcome.

Eligibility Requirements for Aggregation in 2025

The IRS does not allow you to aggregate businesses randomly. Under the permanent rules solidified by the OBBBA, businesses must meet specific criteria to be grouped for tax purposes. These requirements ensure that the aggregated businesses represent a coordinated economic unit.

The primary requirements include:

• Common Ownership: The same person or group of persons must own at least 50% of each trade or business for a majority of the tax year.
• Consistency: The businesses must share the same tax year and be reported on the same tax return.
• No SSTBs: You cannot aggregate a Specified Service Trade or Business (SSTB), such as a law firm or medical practice, with any other business to bypass income limitations.

In addition to these, you must satisfy at least two of the following relationship factors:

1. The businesses provide products and services that are the same or customarily offered together (e.g., a restaurant and a food truck).
2. The businesses share significant centralized business elements, such as accounting, HR, or legal resources.
3. The businesses operate in coordination with or reliance on one another (e.g., one company serves as the primary supplier for another).

The Strategic Advantage for Real Estate and Manufacturing

Real estate and manufacturing sectors stand to benefit the most from aggregation under the OBBBA. In these industries, it is common to have an asset-holding entity that owns the real estate or heavy machinery and an operating entity that employs the staff. Without aggregation, the asset-holding entity might lose its QBI deduction entirely due to lack of W-2 wages.

By aggregating these, the wages from the operating company protect the deduction for the rental income or manufacturing profits. As noted in the Sensiba analysis of 2025 grouping elections, this strategy is essential for sustaining eligibility in sectors where ownership structures are intentionally fragmented for liability protection. The OBBBA’s permanent 100% bonus depreciation rules further enhance this by increasing the UBIA (property basis) available for the 2.5% calculation within the aggregated group.

Filing and Consistency: The Once and Always Rule

Once you elect to aggregate multiple businesses, you must continue to do so in all subsequent years unless there is a significant change in facts and circumstances. This election is made by attaching a statement to your tax return, specifically on Form 8995-A, Schedule B, identifying each business in the group.

If you fail to aggregate on your original return, the IRS generally does not allow you to do so on an amended return. This makes proactive year-end planning vital. If you acquire a new business in 2025, you must decide immediately whether it fits into an existing aggregation or should stand alone. A mistake here can lead to a lost year of tax savings that cannot be recovered.

Managing the SSTB Cliff

It is crucial to remember that Specified Service Trades or Businesses (SSTBs) are entirely excluded from aggregation. If you own both a profitable consulting firm (an SSTB) and a retail shop (a qualified trade), you cannot group them to use the retail shop’s wages to boost the consulting firm’s deduction.

The OBBBA did, however, increase the phase-out thresholds for 2025. For married couples, the phase-out now begins at $394,600 and ends at $494,600. If your taxable income is within this Bucket B range, a portion of your SSTB income still qualifies for the deduction, but it must remain separate from your non-SSTB aggregations. Detailed updates on these 2025 thresholds suggest that even minor income-deferral strategies can keep high-earning professionals within the range to claim at least a partial deduction.

Conclusion: Modeling for Maximum ROI

Aggregation is a powerful multiplier for your tax savings, but it requires precise mathematical modeling. In some rare cases, aggregating can actually lower your total deduction, for instance, if one business has a significant net loss that offsets the profits of others. Before filing, your tax strategist should run side-by-side projections to ensure that your grouping creates the maximum possible tax-free income.

With the QBI deduction now a permanent feature of the U.S. tax landscape, your entity structure should be built for the long term. Aggregation is not just a year-end filing choice, it is a foundational strategy that aligns your business operations with your wealth-preservation goals.

Find a QBI Strategy Expert Today

Navigating the 50% ownership tests and the active trade or business requirements of Section 199A is a high-stakes endeavor that requires specialized knowledge. At Top Tax Planners, we connect you with a vetted network of the country’s most capable tax professionals who specialize in complex entity structures and OBBBA compliance. Don’t leave your QBI deduction to chance, especially when aggregation could double your annual tax savings. Visit the Top Tax Planners Directory today to find a qualified tax professional who can analyze your portfolio and implement an aggregation strategy that maximizes your bottom line for 2025 and beyond.