QBI Section 199A Deduction Calculator 2026
Calculate your 20% qualified business income deduction under IRC §199A for 2026, including SSTB phaseout at $241,950 / $483,900 and W-2 wage limitation. OBBB made this deduction permanent.
How the Section 199A QBI Deduction Works in 2026
The Section 199A qualified business income (QBI) deduction allows pass-through business owners — sole proprietors, S-corp shareholders, partners, and LLC members — to deduct up to 20% of their qualified business income from federal taxable income. The deduction does not affect adjusted gross income; it is a "below-the-line" deduction taken on Schedule 1 of Form 1040, regardless of whether you itemize or take the standard deduction.
The One Big Beautiful Bill (OBBB, P.L. 119-21, signed July 4, 2025) made Section 199A permanent. Without OBBB, the deduction would have expired after December 31, 2025 under the original TCJA sunset. As of 2026, it is a permanent feature of the tax code. Source: irs.gov/newsroom/qualified-business-income-deduction. Last updated: May 2026.
SSTB Phaseout Thresholds for 2026
For Specified Service Trades or Businesses (SSTBs) — which include law, accounting, health services, financial services, consulting, and brokerage — the QBI deduction phases out between $241,950 and $291,950 for single filers, and between $483,900 and $583,900 for married filing jointly filers in 2026. Below the lower threshold, SSTBs get the full deduction. Above the upper threshold, SSTBs receive zero deduction. Engineers and architects are explicitly excluded from SSTB treatment under IRC §199A(d)(1)(B).
Non-SSTB businesses above the threshold face a W-2 wage limitation: the deduction is capped at the greater of (a) 50% of W-2 wages paid, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. Sole proprietors with no employees have a $0 W-2 base, which can reduce the deduction significantly above threshold. Source: IRS Publication 535, Chapter 12.
QBI Deduction vs. Self-Employment Tax Deduction
| Deduction | Type | Who Gets It | Amount | Form |
|---|---|---|---|---|
| QBI (§199A) | Below-the-line | Pass-through owners | Up to 20% of QBI | Form 8995 / 8995-A |
| SE Tax Deduction | Above-the-line | Self-employed only | 50% of SE tax paid | Schedule 1 Line 15 |
| Home Office | Above-the-line (SE) | Self-employed with home office | Actual or simplified | Form 8829 |
The QBI deduction is calculated on net profit AFTER deducting the self-employment tax deduction and self-employed health insurance. Make sure to reduce business net income by these amounts before entering QBI. Use IRS Form 8995 if your taxable income is below the threshold, or Form 8995-A if above. Source: irs.gov/form8995.
Frequently Asked Questions
What is the QBI deduction limit for 2026?
For 2026, the QBI deduction is 20% of qualified business income, capped at 20% of taxable income minus net capital gains. SSTB phaseout begins at $241,950 (single) and $483,900 (MFJ). Non-SSTB businesses have a W-2 wage limitation above these thresholds. Source: IRS Form 8995-A.
What is an SSTB for Section 199A purposes?
A Specified Service Trade or Business (SSTB) includes law, accounting, health, consulting, financial services, brokerage, and certain athletic/performing arts trades. Engineers and architects are explicitly excluded. SSTBs lose the deduction entirely once taxable income exceeds the phase-out ceiling. Source: IRC §199A(d).
Does the QBI deduction survive under OBBB in 2026?
Yes. The One Big Beautiful Bill (P.L. 119-21, signed July 4, 2025) made the TCJA's Section 199A deduction permanent. Without OBBB, it would have expired after 2025. As of 2026, Section 199A is a permanent part of the tax code.
What counts as W-2 wages for the 199A limitation?
W-2 wages for the 199A limitation are the total wages paid to employees by the qualified trade or business, as reported on Forms W-2. For sole proprietors with no employees, the W-2 wage base is $0, which means the W-2 limitation applies in full once income exceeds the threshold. Source: IRS Publication 535.
Can I claim Section 199A if I am an S-corp shareholder?
Yes. S-corp shareholders claim QBI equal to their pro-rata share of the S-corp's qualified business income. The W-2 wages paid by the S-corp (including reasonable compensation) count toward the W-2 wage limitation. File using IRS Form 8995 or 8995-A.