Section 199A QBI Deduction Calculator

What Is the QBI Deduction?

Section 199A allows a 20% deduction of Qualified Business Income (QBI) from pass-through entities — sole proprietorships, S-corporations, partnerships, LLCs. Up to 20% of taxable income (excluding net capital gains). Applies to federal income tax only (not SE tax). Was created by 2017 TCJA, made permanent by 2025 OBBB Act (P.L. 119-21). Available regardless of itemizing or standard deduction.

The SSTB Income Phase-Out (2026 Thresholds)

Specified Service Trade or Business (SSTB) includes: law, accounting, health, financial services, consulting, athletics, performing arts, investing. SSTB owners face phase-out: 2026 phase-out begins at $241,950 single / $483,900 married. Fully phased out at $291,950 single / $583,900 married. Above the cap: SSTB gets ZERO QBI deduction. Non-SSTB businesses don't face this phase-out — use W-2 wages / UBIA limit instead.

Non-SSTB W-2 Wage / Property Limit

Above income threshold for non-SSTB: QBI deduction limited to GREATER of: (1) 50% of W-2 wages paid by the business, OR (2) 25% of W-2 wages + 2.5% of unadjusted basis immediately after acquisition (UBIA) of qualified property. This rewards labor- and capital-intensive businesses. Sole props with $0 W-2 wages get $0 above the cap — unless they have significant qualified property basis.

S-Corp Salary Strategy for QBI

S-corp owners face a tension: lower W-2 salary = lower SE tax but ALSO lower W-2 wages for QBI limit. Higher salary = higher SE tax + more W-2 wages enabling QBI. Sweet spot: pay reasonable salary that maximizes W-2 base for QBI without overpaying SE tax. Often optimal around 50-60% of net profit. Modeled annually with current QBI/SE math — changes when QBI rates or SE caps shift.

Sources: IRC §199A, 2025 OBBB Act P.L. 119-21, IRS 2026 inflation adjustments. Last updated: May 2026. Not tax advice.