QBI Deduction Calculator 2026 — Section 199A

What is How to Use the QBI Deduction Calculator?

The Qualified Business Income (QBI) deduction, established under IRC § 199A by the Tax Cuts and Jobs Act of 2017, lets eligible business owners deduct up to 20% of their qualified business income from federal taxable income. It applies to sole proprietors, single-member LLCs, S-corp shareholders, and partnership partners — but not to C-corporations. The One Big Beautiful Bill Act (OBBBA) of 2025 made the QBI deduction permanent and added a $400 minimum deduction starting in 2026. The deduction operates differently depending on your taxable income. Below the phase-out threshold ($201,775 for single/HOH or $403,500 for MFJ in 2026), you simply deduct 20% of QBI with no restrictions. Above the threshold, two limitations kick in: (1) the W-2 wage limit, which caps the deduction at the greater of 50% of W-2 wages paid by the business or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property; and (2) for Specified Service Trades or Businesses (SSTBs — health, law, accounting, consulting, financial services, etc.), the deduction phases out entirely over a $50,000 range (single) or $100,000 range (MFJ). The QBI deduction is taken on the personal return as an below-the-line deduction — it reduces taxable income but not AGI. It cannot exceed 20% of your overall taxable income (minus net capital gains). The new $400 minimum ensures that even small-business owners with minimal profit receive a meaningful deduction. This calculator handles all these rules for 2026.

How to Use

1. Enter your 2026 qualified business income (net profit from your pass-through business).
2. Enter your estimated taxable income (after the standard/itemized deduction, before the QBI deduction itself).
3. Indicate whether your business is a Specified Service Trade or Business (SSTB) — this matters above the phase-out threshold.
4. If you're above $201,775 (single) / $403,500 (MFJ), enter your W-2 wages and qualified property basis, as the W-2 wage limit may apply.
5. Select your tax bracket to see your estimated tax saving from the deduction.

Tips & Best Practices

• The QBI deduction is taken on the personal return — it is not a business deduction. Your QBI equals net business profit less SE tax deduction and any SE retirement plan contribution.
• If you own an S-corp, reasonable compensation paid to yourself does NOT count as QBI — only the S-corp's remaining distributable profit qualifies.
• Below the phase-out threshold ($201,775 single / $403,500 MFJ), the W-2 wage limit does NOT apply. You get the full 20% regardless of W-2 wages.
• Above the threshold, non-SSTB businesses (e.g., manufacturing, real estate, engineering) can use the W-2 wage limit as an alternative to the pure QBI limit.
• Roth conversions INCREASE taxable income, which can push you deeper into the phase-out range — always model QBI impact before converting.

Frequently Asked Questions

Real-world Examples

Qualified business income:         $85,000
Taxable income (before QBI):       $165,000
Business type:                     Non-SSTB
Filing status:                     Single
Phase-out threshold:               $201,775
Marginal tax bracket:              22%

Step 1 — Base QBI deduction:
$85,000 × 20% = $17,000

Step 2 — Below phase-out threshold?
$165,000 < $201,775 → YES, no W-2 limit applies

Step 3 — Income cap check:
20% of taxable income: $165,000 × 20% = $33,000
$17,000 < $33,000 → not limited by income cap

Step 4 — Final QBI deduction: $17,000

Tax saving at 22% bracket:
$17,000 × 22% = $3,740

Effective tax rate reduction:
$3,740 ÷ $85,000 = 4.4% effective rate savings on QBI

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