QBI Section 199A Deduction Calculator 2026

What is the Section 199A Deduction in 2026?

The Section 199A qualified business income (QBI) deduction lets eligible non-corporate taxpayers deduct up to 20% of their qualified business income from sole proprietorships, partnerships, S corporations, and certain trusts and estates. Originally enacted by the Tax Cuts and Jobs Act of 2017 with a sunset at end of 2025, the deduction was made permanent by the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) — eliminating prior expiration concerns (source: irs.gov).

For 2026, the income thresholds where wage/UBIA limits and SSTB phase-outs kick in are $241,950 single / $483,900 married filing jointly (inflation-adjusted from 2025). Below these thresholds, the full 20% deduction applies regardless of business type or wages paid. Between threshold and threshold + $50,000 single / $100,000 joint phase-in range, the limits scale in. Above that, full limits apply.

The W-2 Wages and UBIA Limit Above the Threshold

Once your taxable income exceeds the threshold, the QBI deduction is limited to the greater of: (1) 50% of W-2 wages paid by the qualified business, or (2) 25% of W-2 wages plus 2.5% of unadjusted basis immediately after acquisition (UBIA) of qualified depreciable property. This limit is designed to favor capital-intensive businesses (real estate, manufacturing) and labor-intensive businesses with significant employees, while restricting the deduction for solo high-income consultants.

UBIA is the original cost basis of depreciable property used in the business, before depreciation, and only counts during the recovery period (typically 5-39 years depending on asset class). Real estate held in a partnership or S-corp can generate significant UBIA — for example, a $1M commercial building generates $25,000 of UBIA-based deduction headroom (2.5% × $1M).

SSTB Phase-Out — The Big Trap

Specified Service Trades or Businesses (SSTBs) include health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing/investment management, and any trade where the principal asset is the reputation or skill of one or more owners. SSTB owners lose the QBI deduction completely once taxable income exceeds the upper threshold ($291,950 single / $583,900 MFJ for 2026). Between threshold and upper threshold, the deduction phases out linearly.

This is the single biggest tax-planning consideration for high-income service-business owners. Strategies to manage SSTB phase-out include: (1) maximizing retirement plan contributions to reduce taxable income below thresholds, (2) bunching deductible expenses, (3) careful S-corp reasonable compensation analysis, (4) cost segregation studies on owned real estate to accelerate depreciation and reduce taxable income. Always work with a CPA or tax attorney for SSTB-impacted situations.

How the Final Deduction is Calculated

The QBI deduction is the LESSER of: (a) 20% of QBI minus net capital gain, (b) the wage/UBIA limit (if applicable), or (c) 20% of (taxable income before QBI minus net capital gain). The third "taxable income" cap is often the binding constraint for retirees and others with large capital gains — it can dramatically reduce the deduction. This calculator applies all three caps and shows which is binding.

For more business and tax planning tools, see our Section 179 vs bonus depreciation calculator, K-1 pass-through tax calculator, and effective tax rate calculator.

Last updated April 2026. Sources: irs.gov, IRS Form 8995/8995-A instructions, P.L. 119-21 (OBBB).