QBI Deduction Calculator 2026 (Section 199A)

What Is the QBI Deduction (Section 199A)?

The Qualified Business Income (QBI) deduction, codified at Internal Revenue Code Section 199A, lets eligible owners of pass-through businesses deduct up to 20% of their qualified business income from taxable income. It applies to sole proprietorships, partnerships, S corporations, and certain trusts and estates — not C corporations. Originally enacted by the Tax Cuts and Jobs Act of 2017 with a sunset of December 31, 2025, the deduction was made permanent by the One Big Beautiful Bill Act (OBBB, P.L. 119-21, signed July 4, 2025), so it remains in force for tax year 2026 and beyond. Source: IRS Publication 535.

The QBI deduction is claimed below the line — it reduces taxable income but does not reduce self-employment tax, AGI, or net investment income tax. It is available whether the taxpayer itemizes or takes the standard deduction. The simplified Form 8995 is used when taxable income is below the lower threshold; the full Form 8995-A applies when the taxpayer is in or above the phase-in range.

2026 Thresholds and Phase-In Rules (Section 199A)

For 2026, the QBI deduction has three tiers based on taxable income before QBI:

• Below the lower threshold — full 20% of QBI deduction with no W-2 wage or UBIA limit, regardless of business type. The 2026 lower threshold is approximately $241,950 (single / HOH / MFS) and $483,900 (MFJ), reflecting the 2025 IRS amounts indexed for inflation. Verify the final 2026 figure with Revenue Procedure 2025-19.
• Inside the phase-in range — the W-2 wage and UBIA limit phases in over $50,000 (single) or $75,000 (MFJ) above the lower threshold. SSTB owners also see their QBI itself phase out over the same range.
• Above the upper threshold — non-SSTB owners are fully limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of UBIA. SSTB owners get zero QBI deduction once fully phased out.

The deduction is also subject to an overall cap: it cannot exceed 20% of (taxable income before QBI minus net capital gains and qualified dividends). This calculator applies all three tests automatically. The OBBB Act 2025 also adjusted some Section 199A mechanics — check Form 8995-A 2026 instructions for the final 2026 phase-in width and any new SSTB definitions.

SSTB vs Non-SSTB: Why It Matters Above the Threshold

A Specified Service Trade or Business (SSTB) is any trade or business involving services in health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investment management, trading, dealing in securities, or any business where the principal asset is the reputation or skill of one or more employees or owners. Engineering and architecture are explicitly excluded from SSTB classification.

Below the lower threshold, SSTB and non-SSTB owners are treated identically — both qualify for the full 20% deduction. Above the upper threshold, SSTB owners are fully phased out and receive no QBI deduction; non-SSTB owners can still claim the deduction but are subject to the W-2 wage / UBIA limit. Inside the phase-in range, SSTB owners see both their qualified income and the wage/UBIA limit phase in proportionally — making the math significantly more punitive than for non-SSTB taxpayers in the same income range.

How the W-2 Wage and UBIA Limits Work

The W-2 wage limit caps the deduction at the greater of: (a) 50% of W-2 wages paid by the qualified trade or business, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property. UBIA generally means the original cost basis of depreciable tangible property still within its depreciable period. This favors capital-intensive businesses like real estate rentals (where wages may be low but UBIA is high) and labor-intensive S corporations (where wages are high but property is minimal).

This calculator uses the standard Form 8995-A approach: calculate the tentative 20% QBI deduction, calculate the W-2/UBIA limit, take the lesser, then apply the overall taxable-income cap. The 2026 figures above incorporate the OBBB-permanent rules but should be verified against the final IRS 2026 inflation adjustments before filing. Last updated: May 3, 2026.