Qualified Business Income QBI 199A 2026 Calculator

How QBI Deduction Works

Section 199A (TCJA 2017, made permanent by OBBB 2025) allows a 20% deduction on qualified business income from pass-through entities — sole proprietorships, partnerships, S-corps, and certain trusts/estates. The deduction is taken below the line (not against AGI), reducing taxable income directly.

Wage Limitation Above Threshold

Above income thresholds ($241,950 single / $483,900 MFJ in 2026), the deduction is limited to the greater of (a) 50% of W-2 wages paid by the qualifying business, or (b) 25% of W-2 wages + 2.5% of unadjusted basis (UBIA) of qualified property. This favors businesses with employees or significant fixed assets.

SSTB Phase-Out

Specified Service Trades or Businesses (law, health, accounting, financial services, consulting, performing arts, athletics) face additional phase-out. Below threshold: same as non-SSTB. Within phase-in range: prorated. Above upper threshold: SSTB deduction is fully eliminated. Engineering and architecture are NOT SSTBs.

2026 QBI Thresholds — Exact Numbers by Filing Status

The Section 199A thresholds are indexed for inflation. For tax year 2026 (per IRS Rev. Proc. 2025-32): single/MFS lower threshold $241,950, upper $291,950 (phase-in range $50,000); MFJ lower threshold $483,900, upper $583,900 (phase-in range $100,000). Below the lower threshold, you get the full 20% deduction with no wage or SSTB limit. Between lower and upper, the wage limit and SSTB rules phase in linearly. Above the upper threshold, the full wage limit applies and SSTB deductions vanish entirely. The calculator above applies the correct 2026 numbers automatically based on your filing status — no manual lookup needed.

Common QBI Mistakes That Cost Real Money

Top errors the calculator prevents: (1) forgetting to subtract reasonable S-corp shareholder wages from QBI — those wages are excluded by statute; (2) applying the 20% deduction against gross revenue instead of net qualified business income; (3) missing the aggregation election that can rescue an under-wage business by combining it with a higher-wage related business under Reg. 1.199A-4; (4) claiming QBI on rental income that fails Notice 2019-7's safe harbor and does not rise to Section 162 trade-or-business level (see our companion QBI real estate safe harbor calculator). The deduction is capped at 20% of (taxable income minus net capital gains) — so it can be smaller than 20% of QBI when other income is high.

Source: IRC Section 199A, IRS Final Regulations 1.199A-1 through 1.199A-6, IRS Rev. Proc. 2025-32 (2026 inflation adjustments), OBBB (P.L. 119-21) making 199A permanent. Last updated: 2026-07-03.