Business & self-employed
How the 20% QBI deduction works in 2026
The qualified business income deduction (Section 199A) lets owners of sole proprietorships, partnerships, S-corporations and most LLCs deduct up to 20% of their business profit directly from taxable income — a benefit made permanent for years beginning after 2025. On $120,000 of QBI that is a $24,000 deduction, worth several thousand dollars in tax.
Below the threshold: simple 20%
If your total taxable income is at or below the 2026 threshold — $201,775 (single) or $403,500 (married filing jointly) — the rules are easy: you deduct 20% of QBI, capped at 20% of your taxable income (excluding net capital gains). No wage tests, no business-type restrictions.
Above the threshold: limits kick in
Past the threshold, two things happen over a phase-in range of $50,000 (single) or $100,000 (married):
- Specified service trades or businesses (SSTBs) — health, law, accounting, consulting, financial services, and similar fields whose principal asset is the owner’s reputation or skill — see the deduction phase out completely once income clears the top of the range.
- Non-service businesses keep the deduction, but it becomes limited by the greater of 50% of W-2 wages paid, or 25% of wages plus 2.5% of qualified property.
Thresholds source: IRS Rev. Proc. 2025-32 (2026). This calculator models the SSTB phase-out; for non-service businesses it assumes you have enough W-2 wages or property to support the full deduction.
QBI is calculated after the deductible half of self-employment tax and other business deductions — estimate that first with the self-employment tax calculator. Self-employed owners usually pay in quarterly; size those with the estimated quarterly tax calculator. To see the bracket the deduction saves you from, use the marginal tax rate calculator.
Questions
QBI Deduction Calculator 2026 FAQ
What is the QBI deduction for 2026?
Section 199A lets eligible owners of pass-through businesses deduct up to 20% of qualified business income from taxable income. It was made permanent for tax years beginning after 2025. The deduction is capped at 20% of your taxable income excluding net capital gains.
What are the 2026 income thresholds?
The thresholds where limitations begin are $201,775 for single and head-of-household filers and $403,500 for married filing jointly (IRS Rev. Proc. 2025-32). Below these, you get the full 20% with no wage test or business-type restriction. The phase-in range above is $50,000 (single) or $100,000 (married).
What is a specified service business (SSTB)?
An SSTB is a trade or business in fields like health, law, accounting, consulting, athletics, financial services, brokerage, or any business whose principal asset is the reputation or skill of its owners. Above the income thresholds, the QBI deduction for an SSTB phases out and disappears entirely at the top of the range.
Can high earners with a non-service business still claim QBI?
Yes, but above the threshold the deduction is limited to the greater of 50% of the W-2 wages the business pays, or 25% of wages plus 2.5% of the unadjusted basis of qualified property. A profitable non-service business with enough payroll can still claim a substantial deduction.
- Sources: IRC §199A · IRS Rev. Proc. 2025-32 (2026 thresholds) · IRS Form 8995 / 8995-A instructions · IRS QBI deduction FAQ.
- 🔄 Last updated June 27, 2026 · Tax year 2026
Disclaimer: Educational estimate, not tax advice; the operator is not a CPA. The full Section 199A rules include W-2 wage and property limits, REIT/PTP income and aggregation choices this tool simplifies. Confirm with a tax professional.
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