Estimate the Section 199A qualified business income deduction for sole proprietors, partners and S corporation owners: 20% of QBI, limited by your taxable income, the W-2 wage and property test above the threshold, and the phase-out for specified service businesses.
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You
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AGI minus standard or itemized deductions.
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Business
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Net profit after SE tax deduction, SE health insurance and retirement contributions.
Unadjusted original cost of depreciable property still in its recovery period.
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Enter your values to see the result.
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How to use the QBI Deduction Calculator
Pick the year and filing status, then enter taxable income before the QBI deduction and any net capital gain.
Enter your QBI: the net profit of the pass-through business after related deductions.
Tick SSTB if the business is a specified service trade (law, health, consulting, etc.).
Enter W-2 wages and UBIA of property; they matter only above the threshold.
Calculate to see the deduction, which limit applies, and the tax savings.
How the QBI deduction is calculated
Tentative deduction = 20% × QBI.
Below the threshold: keep the full 20%, for any type of business.
Above the threshold + range: deduction = lesser of 20% × QBI or the wage limit = max(50% × W-2 wages, 25% × W-2 wages + 2.5% × UBIA). SSTBs get $0.
Inside the phase-in range: reduction = (20% × QBI − wage limit) × (taxable income − threshold) ÷ range. SSTBs first multiply QBI, wages and UBIA by the applicable percentage, 1 − that same fraction.
Overall cap: total deduction (QBI component + 20% of REIT/PTP) ≤ 20% × (taxable income − net capital gain).
Thresholds by year
Year
Single / HOH / MFS threshold
Fully phased in at
Joint threshold
Fully phased in at
2025
$197,300
$247,300
$394,600
$494,600
2026
$201,750
$276,750
$403,500
$553,500
Sources: IRS Rev. Proc. 2024-40 and 2025-32; P.L. 119-21 widened the phase-in range to $75,000 / $150,000 from 2026.
Worked example
A married couple in 2026 with $450,000 of taxable income, $300,000 of QBI from a non-service business, $60,000 of W-2 wages and $200,000 of UBIA: 20% of QBI is $60,000. The wage limit is max($30,000, $15,000 + $5,000) = $30,000. They are $46,500 into the $150,000 range (31%), so the reduction is ($60,000 − $30,000) × 31% = $9,300 and the deduction is $50,700, below the income cap of 20% × ($450,000 − $10,000 net capital gain) = $88,000.
Ways to increase the deduction
Pre-tax retirement contributions lower taxable income and may move you below the threshold (they also reduce QBI slightly).
Paying W-2 wages (including an S corporation owner's salary) raises the wage limit for non-service businesses above the threshold.
Buying depreciable property raises UBIA, which helps capital-intensive businesses with few employees.
Frequently asked questions
What is the QBI deduction?
Section 199A lets owners of sole proprietorships, partnerships, S corporations and some trusts deduct up to 20% of qualified business income, plus 20% of REIT dividends and publicly traded partnership income. It is taken on Form 8995 or 8995-A and reduces taxable income, not AGI. The 2025 tax law (P.L. 119-21) made it permanent.
What are the QBI income thresholds for 2026?
For 2026 the limits start at $201,750 of taxable income ($403,500 married filing jointly) and phase in fully over the next $75,000 ($150,000 joint). For 2025 the thresholds were $197,300 and $394,600 with $50,000 and $100,000 ranges.
How does the W-2 wage limit work?
Above the threshold, the deduction for each business cannot 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 (UBIA). Inside the phase-in range only part of the excess is cut. Below the threshold, the limit does not apply.
What is a specified service trade or business (SSTB)?
Businesses in health, law, accounting, actuarial science, performing arts, consulting, athletics, financial and brokerage services, investing and trading, and any business whose main asset is the reputation or skill of its owners or employees. SSTB owners get the full deduction below the threshold, a shrinking share inside the range, and none above it.
Why is my deduction lower than 20% of QBI?
The deduction is capped at 20% of taxable income minus net capital gain. If most of your income is business income and you take a large standard or itemized deduction, this overall limit often applies. Above the threshold, the wage limit or SSTB rules can reduce it further.
Do S corporation salaries count as QBI?
No. Reasonable compensation paid to an S corporation owner and guaranteed payments to partners are not QBI, but wages the business pays (including the owner's salary) count as W-2 wages for the wage limit.
What is the $400 minimum deduction?
Starting in 2026, taxpayers who materially participate in an active business with at least $1,000 of QBI get a deduction of at least $400, indexed for inflation after 2026. It helps low-income business owners whose 20% calculation would be smaller.
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