QBI Deduction Calculator

Now permanent under OBBBA

QBI Deduction Calculator

Calculate your Section 199A 20% deduction for 2026 — and see if SSTB or W-2 wage limits apply.

The Qualified Business Income (QBI) deduction lets owners of pass-through businesses — sole proprietors, partnerships, S-corps, and most LLCs — deduct up to 20% of their business income. The OBBBA made this deduction permanent and widened the income range it phases out over. Below a threshold, everyone gets the full 20%. Above it, the rules get more complex depending on whether your business is a "specified service" and how much W-2 wages it pays. This calculator walks through both.

Filing status
$
$
Please enter your taxable income to calculate.
› Add W-2 wages paid (for the high-income wage test)
$
Leave blank if your business pays no W-2 wages (common for solo owners).
Your estimated QBI deduction
$0
20% of qualified business income, after limits.
Phase-in status
Below threshold
Uncapped 20% deduction
$0
Approx. tax saving (24% rate)
$0
!

Missing taxable income figure

Please enter your total taxable income before calculating — it's the required field.

How the QBI deduction works

At its simplest, the QBI deduction is 20% of your qualified business income, capped at 20% of your taxable income (excluding net capital gains). Below the 2026 threshold — $201,775 single / $403,500 married filing jointly — that's the whole calculation, full stop, regardless of what kind of business you run or how many employees you have.

The basic formula (below threshold)
QBI deduction = min(20% × QBI, 20% × taxable income)
No SSTB restriction or W-2 wage test applies below the threshold
Worked example — single filer, $150,000 QBI, $230,000 taxable income: 20% × $150,000 = $30,000, capped at 20% × $230,000 = $46,000. Since $30,000 is lower, the deduction is the full $30,000.

What changes above the threshold

Once your taxable income crosses the threshold, two separate rules can kick in, and they apply differently depending on your business type:

  • SSTB (Specified Service Trade or Business): health, law, accounting, consulting, financial services, performing arts, and similar fields. Once you're fully above the phase-in range, SSTB owners get a $0 QBI deduction — it disappears entirely, regardless of income.
  • Non-SSTB businesses: instead get limited by a W-2 wage/property test — the deduction can't exceed the greater of 50% of W-2 wages paid, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property.
  • In between: within the phase-in range, both limitations apply proportionally rather than all-or-nothing.

2026 phase-in thresholds

Filing statusPhase-in startsFully phased in
Single$201,775$276,775
Married filing jointly$403,500$553,500

The OBBBA widened this phase-in range from $50,000/$100,000 to $75,000/$150,000, giving high earners more room before the limitations fully bite.

Why W-2 wages matter so much

A solo consultant with no employees and high income can get squeezed by both rules at once: if their business is an SSTB, the deduction vanishes; if it isn't, paying $0 in W-2 wages means the wage test caps the deduction near zero too. This is part of why some high-earning pass-through owners restructure to pay themselves W-2 wages or bring on staff — it can directly preserve QBI deduction room. For the bigger tax picture, see the income tax calculator and profit margin calculator; if you're also navigating quarterly payments, the quarterly estimated tax calculator helps too.

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Frequently asked questions

What is the QBI deduction?+
It's a deduction of up to 20% of qualified business income from a pass-through business — sole proprietorships, partnerships, S-corps, and most LLCs. It reduces taxable income but isn't a business expense; it's a personal deduction claimed on your individual return.
Is the QBI deduction permanent now?+
Yes. It was originally set to expire after 2025 under the Tax Cuts and Jobs Act, but the One Big Beautiful Bill Act made it permanent and widened the income phase-in range for 2026 onward.
What counts as a Specified Service Trade or Business (SSTB)?+
Health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, and any business where the principal asset is the reputation or skill of its employees or owners. Engineering and architecture are notably excluded from SSTB treatment.
Does the QBI deduction reduce self-employment tax?+
No. The QBI deduction only reduces federal income tax. It has no effect on self-employment tax (Social Security and Medicare), which is still calculated on your full net self-employment income before the QBI deduction.
What if my business has multiple owners or income streams?+
QBI is calculated separately for each trade or business, then the results are typically combined (with some limitation rules) before applying the overall 20%-of-taxable-income cap. Partners and S-corp shareholders apply the thresholds based on their own total taxable income, not the entity's.
Can rental real estate qualify for the QBI deduction?+
Often yes, if the rental activity rises to the level of a trade or business — the IRS provides a safe harbor (generally 250+ hours of rental services per year) that many landlords use to qualify, though it requires careful recordkeeping.
Why would paying W-2 wages increase my deduction?+
Above the income threshold, non-SSTB businesses are limited to the greater of 50% of W-2 wages paid or 25% of wages plus 2.5% of qualified property. A business that pays no wages at all can see this limit cap its deduction near zero, even with substantial profit.
This calculator provides general estimates only and is not tax or legal advice. It models the standard 2026 QBI thresholds, the SSTB phase-out, and a simplified W-2 wage test, but does not calculate the full unadjusted basis of qualified property (UBIA) limitation, REIT/PTP income treatment, or multi-business aggregation rules. Confirm your specific deduction with a tax professional.

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