QBI Deduction Calculator

The qualified business income (QBI) deduction lets eligible owners of pass-through businesses (sole proprietorships, partnerships, S corporations, and most LLCs) deduct up to 20% of their qualified business income. It was created by the Tax Cuts and Jobs Act under Internal Revenue Code Section 199A. You take it on your personal return, and it lowers taxable income rather than adjusted gross income. Two limits can reduce it: a W-2 wage and property limit, and an overall cap tied to your taxable income.

Your taxable income before the QBI deduction decides which rules apply. For the 2026 tax year, if it stays at or below $201,750 (single or head of household), $201,775 (married filing separately), or $403,500 (married filing jointly), you get the full 20% with no wage or property limit. Above those thresholds there is a phase-in range of $75,000, or $150,000 for joint filers, where the limits and any SSTB reduction apply gradually. Once your income reaches the top of that range, the limits apply in full.

Above the income threshold, your deduction for a business cannot exceed the greater of two amounts: 50% of the W-2 wages the business paid, or 25% of those W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of its qualified property. UBIA generally reflects the original cost of buildings and equipment still in use. This limit is why a capital-intensive or wage-paying business often keeps more of the deduction than one with little payroll. Inside the phase-in range, only part of the limit applies.

A specified service trade or business (SSTB) is one where the main asset is the reputation or skill of its owners or employees, such as health, law, accounting, consulting, financial services, performing arts, and athletics. If your taxable income is below the threshold, SSTB status does not matter and you get the full 20%. In the phase-in range, your QBI, W-2 wages, and property are each reduced by an applicable percentage before the limits are tested. Above the top of the range, an SSTB gets no QBI deduction at all.

It models one trade or business using 2026 tax-year thresholds and assumes your qualified business income is positive. If your active QBI is at least $1,000, 2026 law adds a $400 minimum deduction; this calculator assumes the QBI you enter is active qualified business income. It does not net multiple businesses, carry forward business losses, or include the separate 20% deduction for qualified REIT dividends and publicly traded partnership income. It does apply the regular overall cap of 20% of taxable income minus net capital gains (which include qualified dividends), so enter those gains to keep that limit accurate.

No. This tool gives an estimate to help you understand how the Section 199A deduction works and what drives it. Tax rules change, and your situation may involve aggregation elections, REIT or PTP income, or other facts this model does not capture. Confirm your actual deduction on IRS Form 8995 or Form 8995-A and with a qualified tax professional before filing.