Could Your Business Save More With Pass-Through Deductions?

As 2026 unfolds, propane businesses are making key decisions that will directly affect their cash flow for the new year – from fleet upgrades to storage improvements and financing plans. This year also brings welcome clarity on the tax side. Recent federal tax changes have permanently extended the 20% qualified business income deduction for pass-through entities and adjusted how business interest deductions are calculated. For propane distributors operating as S-corps, partnerships, or sole proprietorships, these updates remove uncertainty and create new planning opportunities at a time when margins and capital costs remain under pressure.

The qualified business income deduction, often called the QBI deduction, was originally set to expire at the end of 2025. That looming deadline made long-term planning difficult, especially for businesses weighing major investments. Under the new law, the 20% deduction is now permanent. If your propane business qualifies, you can continue to deduct up to 20% of eligible business income from your taxable income. This can meaningfully reduce your tax bill and improve after-tax returns on growth investments such as new bobtails, bulk plant improvements, or technology upgrades.

The law also improves the treatment of business interest deductions. In recent years, limits on deductible interest have become tighter because depreciation and amortization were included when calculating adjusted taxable income. The updated rules reverse that approach for many businesses, which can allow a larger share of interest expense to be deducted. For propane companies that rely on financing for vehicles, tanks, or facility projects, this change can lower taxable income and make financed investments more tax-efficient.

These updates are especially relevant as propane businesses plan capital spending for the year. Decisions about whether to lease or finance equipment, how to time large purchases, and how income flows through the business structure can now be made with greater confidence. The benefits are not automatic, however. Eligibility rules still apply, and the interaction between deductions, interest limits, and entity structure can vary from one business to another.

Taking time now to review these changes with your CPA can help you align fleet financing, capital expenditures, and income planning with the updated tax rules. When used correctly, the permanent QBI deduction and improved interest treatment can support stronger cash flow, better budgeting, and more informed day-to-day decisions across all operations.