QBI Deduction Calculator 2026

How the QBI Deduction Works in 2026

The Section 199A deduction lets eligible pass-through owners deduct up to 20% of qualified business income from a sole proprietorship, partnership, or S corporation. The Tax Cuts and Jobs Act introduced it in 2018, and the One Big Beautiful Bill Act (P.L. 119-21, Sec. 70105) made it permanent and updated it for tax years beginning after December 31, 2025.

The deduction sits below the line, so you can take it whether you use the standard deduction or itemize. It does not reduce self-employment tax, Social Security tax, or Medicare tax. Only your federal income tax.

2026 Threshold and Phase-In Range (Post-OBBB)

The phase-in range was widened for 2026 to smooth out the calculation across the threshold:

Below the threshold, you get a flat 20% of QBI (capped at 20% of taxable income net of capital gains). Inside the phase-in range, the W-2 wage / UBIA limit kicks in partially. Above the upper bound, the wage limit fully applies and Specified Service Trade or Business (SSTB) income is disallowed.

The W-2 Wage and UBIA Limit

For income above the threshold, your QBI deduction is capped at the greater of:

• 50% of W-2 wages paid by the business, or
• 25% of W-2 wages + 2.5% of UBIA (Unadjusted Basis Immediately after Acquisition) of qualified depreciable property.

If your business pays no W-2 wages and owns no qualified property, the deduction phases to zero by the upper bound, unless the new $400 minimum applies.

SSTB (Specified Service Trade or Business)

SSTBs include health care, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, investment management, and any business whose main asset is the reputation or skill of its owners. For SSTB owners above the upper bound, the QBI deduction is fully disallowed (subject to the new $400 floor).

The New $400 Minimum (TY 2026 Onward)

Starting in tax year 2026, taxpayers with at least $1,000 of active QBI in a trade or business where they materially participate are guaranteed at least a $400 deduction, even if the standard 20% calculation comes out lower. The amount is indexed for inflation (rounded to the nearest $5) starting in 2027.

Worked Example — MFJ, Non-SSTB, Wage-Limited

QBI = $300,000, taxable income = $480,000, W-2 wages = $80,000, UBIA = $0:

• Tentative 20% = $60,000
• Wage limit = max(50% × $80k, 25% × $80k) = $40,000
• Excess over wage limit = $20,000
• Phase-in ratio = ($480,000 − $403,500) / $150,000 = 51%
• Reduction = $20,000 × 0.51 = $10,200
• Final deduction = $60,000 − $10,200 = $49,800