QBI Deduction Calculator
Calculate your Section 199A Qualified Business Income deduction. Get up to 20% off your pass-through business income. Updated for 2025-2026 with permanent QBI rules.
Your total taxable income from all sources
Net profit from your pass-through business
QBI Deduction
$20,000
20.0% of QBI
Estimated Tax Savings
$4,800
At 24% marginal rate
Calculation Breakdown
Your Income Status
Below Threshold - Full Deduction
Your taxable income ($150,000) is below the $197,300 threshold. You get the simple 20% QBI deduction.
2025 Thresholds (SINGLE)
Full deduction: Below $197,300
Phase-out range: $197,300 - $247,300
Above threshold: Over $247,300
Who Qualifies for the QBI Deduction?
Sole Proprietors
Schedule C filers
S-Corp Owners
K-1 income from S-Corps
Partners
Partnership K-1 income
LLC Members
Single or multi-member LLCs
Who Does NOT Qualify
- ✕ W-2 employees
- ✕ C-Corporation owners
- ✕ Income from C-Corp wages/dividends
What is Qualified Business Income?
- Net profit from business operations
- Ordinary income (not capital gains)
- US-sourced income
What is an SSTB?
Specified Service Trade or Business (SSTB) is a category of businesses where the QBI deduction phases out at higher income levels.
- • Health (doctors, dentists, nurses)
- • Law (attorneys, paralegals)
- • Accounting (CPAs, bookkeepers)
- • Actuarial science
- • Performing arts
- • Consulting
- • Athletics
- • Financial services
- • Brokerage services
- • Investment management
- • Engineering
- • Architecture
- • Real estate agents/brokers
- • Insurance agents
- • Manufacturing
- • Retail
- • Construction
- • Food services
- • Transportation
How the QBI Deduction Works
Below Threshold (Simple Calculation)
If taxable income is below $197,300 (single) or $394,600 (married):
QBI Deduction = Lesser of (20% × QBI) or (20% × Taxable Income)In Phase-Out Range
Income between threshold and threshold + $50K (single) / $100K (married):
- • W-2 wages and UBIA limitations gradually phase in
- • SSTB deduction gradually phases out to zero
Above Threshold
Income above $247,300 (single) or $494,600 (married):
Non-SSTB businesses:
QBI Deduction = Lesser of 20% QBI or Greater of:
(50% × W-2 Wages) OR (25% × W-2 Wages + 2.5% × UBIA)SSTB businesses:
No QBI deduction available2025-2026 QBI Updates
QBI Deduction is Now Permanent!
The One Big Beautiful Bill Act (July 4, 2025) made the Section 199A QBI deduction permanent. Previously set to expire after 2025, pass-through business owners can now rely on this 20% deduction indefinitely.
- Permanent 20% deduction for pass-through income
- New $400 minimum deduction starting 2026 for qualifying low-income taxpayers
- Thresholds adjust annually for inflation
Section 199A QBI Deduction: How the 20% Pass-Through Deduction Works
The Section 199A Qualified Business Income (QBI) deduction allows owners of pass-through businesses to deduct up to 20% of their qualified business income from their personal tax return. This deduction was created by the Tax Cuts and Jobs Act of 2017 and made permanent by the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025.
The deduction is available to sole proprietors (Schedule C), S-corporation shareholders (K-1), partners in partnerships (K-1), and LLC members. It is not available to C-corporation shareholders or W-2 employees. The deduction is claimed on Form 8995 (simplified, for taxpayers below threshold) or Form 8995-A (detailed, for taxpayers above threshold or with SSTBs).
The basic calculation below the income threshold is straightforward: your deduction equals the lesser of 20% of QBI or 20% of taxable income (before the QBI deduction). For example, with $150,000 in QBI and $180,000 in taxable income: 20% x $150,000 = $30,000 and 20% x $180,000 = $36,000. The deduction is $30,000, saving approximately $7,200 at the 24% marginal rate.
SSTB Rules and 2026 Phase-Out Thresholds
A Specified Service Trade or Business (SSTB) under IRC Section 199A(d)(2) is any trade or business involving services in health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, or any business where the principal asset is the reputation or skill of employees/owners.
For 2026, the income thresholds that trigger additional limitations are:
| Filing Status | Phase-Out Start | Phase-Out End | Phase-Out Range |
|---|---|---|---|
| Single / HoH / MFS | $191,950 | $241,950 | $50,000 |
| Married Filing Jointly | $383,900 | $483,900 | $100,000 |
Below the threshold: SSTB status does not matter. You get the full 20% deduction regardless of business type. In the phase-out range: SSTB income and W-2 wages/UBIA are reduced proportionally, and the deduction phases down. Above the threshold: SSTB businesses receive zero QBI deduction, while non-SSTB businesses are limited by the W-2 wages/UBIA test.
W-2 Wage and UBIA Limitations for High Earners
Once taxable income exceeds the threshold, non-SSTB businesses must satisfy one of two tests (whichever produces the larger amount):
- 50% of W-2 wages test: QBI deduction cannot exceed 50% of the W-2 wages paid by the business.
- 25% of wages + 2.5% of UBIA test: QBI deduction cannot exceed 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property (depreciable business assets still within their depreciable period or 10 years after placed in service, whichever is longer).
For S-Corp owners, the W-2 salary you pay yourself counts toward the W-2 wages test. A common strategy: if your S-Corp has $300,000 in QBI and you pay yourself $120,000 in W-2 wages, the 50% test allows a maximum deduction of $60,000 (50% x $120,000). Since 20% of QBI = $60,000, you get the full deduction. Without W-2 wages, the deduction would be zero above the threshold.
Aggregation rules under Treas. Reg. 1.199A-4 allow taxpayers to combine multiple businesses for QBI purposes, which can help when one business has high W-2 wages and another has high QBI but no employees. Once elected, aggregation must be maintained consistently.
Related Calculators
Official IRS References
- IRS: Qualified Business Income Deduction Overview
Official IRS guidance on Section 199A
- IRS Form 8995: Qualified Business Income Deduction Simplified Computation
For taxpayers with income below threshold
- IRS Form 8995-A: Qualified Business Income Deduction
For taxpayers with income above threshold or SSTBs
This calculator provides estimates for educational purposes only. Actual deductions depend on your specific tax situation, aggregation elections, and other factors. Consult a qualified tax professional for personalized advice.