Who qualifies for the QBI deduction?

Owners of pass-through businesses (sole proprietors, single-member LLCs, multi-member LLCs/partnerships, and S-corps), with qualified business income from a U.S. trade or business. C-corp shareholders do NOT qualify; C-corp dividends are not QBI.

A 'specified service trade or business' under Section 199A: health, law, accounting, actuarial, performing arts, consulting, athletics, financial services, brokerage, investing/investment management, and any trade where the principal asset is the reputation or skill of an owner. SSTB owners phase out of the QBI deduction above the income thresholds.

What are the income thresholds?

Approximate 2026 thresholds (adjusted annually): $241,950 (single) / $483,900 (married filing jointly). Below: full 20% deduction regardless of SSTB. Phase-in range: $50,000 (single) / $100,000 (MFJ). Above: SSTBs lose the deduction entirely; non-SSTBs are limited by W-2 wages and UBIA of qualified property.

Does the calculator handle the W-2 wage and UBIA limits?

No, for simplicity. Above the phase-in for non-SSTBs, the deduction is limited to the greater of (a) 50% of W-2 wages paid OR (b) 25% of W-2 wages + 2.5% of UBIA of qualified property. The calculator assumes those limits are satisfied. For an accurate calculation when those limits bind, work with a CPA.

Free Calculator

QBI Deduction Calculator

Section 199A allows up to a 20% deduction on qualified business income. The phase-out for SSTBs above the threshold makes the calculation non-trivial.

Your situation

Section 199A allows up to a 20% deduction on qualified business income from passthroughs. SSTBs (specified service trades) phase out above the income thresholds.

Qualified business income (QBI)$150,000

Taxable income (before QBI deduction)$220,000

Married filing jointlyBusiness is a specified service trade (SSTB), law, health, consulting, finance, etc.

Estimated QBI deduction

$30,000

Section 199A deduction allowed against taxable income

Pre-phaseout (20% of QBI)$30,000

Income zoneBelow threshold, full deduction

Allowed QBI deduction$30,000

Read this carefully

Directional only. Above the threshold for non-SSTBs, the deduction is limited by W-2 wages and UBIA of qualified property, not modeled here. REIT/PTP income, aggregation elections, and net loss carryovers also matter. Review your QBI position.

Estimates for educational purposes only, not tax, legal, investment, or accounting advice. Your specific facts will change the result; confirm with a CPA before acting.

QBI interacts with the S-corp decision

S-corp owners often lose part of their QBI deduction because the wage they pay themselves reduces QBI. The S-corp savings can still exceed the QBI loss, but the right answer requires modeling both at the same time.

See S-Corp Savings Calculator

Frequently Asked

QBI deduction questions

Who qualifies for the QBI deduction?: Owners of pass-through businesses (sole proprietors, single-member LLCs, multi-member LLCs/partnerships, and S-corps), with qualified business income from a U.S. trade or business. C-corp shareholders do NOT qualify; C-corp dividends are not QBI.
What is an SSTB?: A 'specified service trade or business' under Section 199A: health, law, accounting, actuarial, performing arts, consulting, athletics, financial services, brokerage, investing/investment management, and any trade where the principal asset is the reputation or skill of an owner. SSTB owners phase out of the QBI deduction above the income thresholds.
What are the income thresholds?: Approximate 2026 thresholds (adjusted annually): $241,950 (single) / $483,900 (married filing jointly). Below: full 20% deduction regardless of SSTB. Phase-in range: $50,000 (single) / $100,000 (MFJ). Above: SSTBs lose the deduction entirely; non-SSTBs are limited by W-2 wages and UBIA of qualified property.
Does the calculator handle the W-2 wage and UBIA limits?: No, for simplicity. Above the phase-in for non-SSTBs, the deduction is limited to the greater of (a) 50% of W-2 wages paid OR (b) 25% of W-2 wages + 2.5% of UBIA of qualified property. The calculator assumes those limits are satisfied. For an accurate calculation when those limits bind, work with a CPA.

Keep reading

Glossary

Schedule K-1

The IRS form a partnership, S-corp, or trust issues to each owner or beneficiary allocating their share of the entity's income, deductions, and credits. The single source document behind millions of personal returns each spring.

Glossary

Passthrough Entity

A business entity that doesn't pay federal income tax at the entity level; income passes through to the owners on K-1s and is taxed on their personal returns. Covers partnerships, S-corps, and most LLCs — the default tax shape for U.S. small businesses.

Glossary

S-Corporation (S-corp)

A passthrough tax election (not an entity type) that lets owner-employees split income between salary (subject to FICA and Medicare) and distribution (not). The most common tax structure for profitable, single-owner and family-owner U.S. businesses.

Glossary

Limited Liability Company (LLC)

A flexible legal entity that combines personal liability protection with passthrough taxation by default. The default legal form for most U.S. small businesses because it separates owner liability from business liability without triggering C-corp double taxation.

Guide

QBI (Section 199A) Deduction: The Full Walkthrough

The 20% pass-through deduction has SSTB phase-outs, wage and UBIA limits, REIT/PTP rules, and aggregation elections. Here's the complete framework, not the surface version.

Guide

California PTET: The SALT-Cap Workaround for High-Income Owners

California's Pass-Through Entity Tax election lets passthrough owners pay state tax at the entity level, sidestepping the $10K federal SALT cap. Here's how to elect and when it pays off.