QBI Deduction Calculator (Section 199A)

Section 199A allows owners of pass-through businesses (sole props, partnerships, S-corps) to deduct up to 20% of their Qualified Business Income from federal taxable income. Created by TCJA effective 2018 and made permanent by the OBBBA in July 2025 (no scheduled sunset). For a self-employed person making $200K, the deduction can save $7,000-$10,000+ in federal tax annually.

Specified Service Trades or Businesses include health, law, accounting, actuarial science, consulting, financial services, brokerage and investment management, performing arts, athletics, and any business whose principal asset is the reputation or skill of its employees. Manufacturing, retail, and real estate generally are not SSTBs. SSTBs lose the QBI deduction entirely once taxable income exceeds an annually-indexed threshold (about $276,750 single / $553,500 for joint filers in 2026, indexed each year), with a phase-out range below full loss. Non-SSTBs still get QBI above those thresholds but subject to W-2 wage / property limits.

Above the income thresholds, the QBI deduction for non-SSTBs is capped at the GREATER of (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages PLUS 2.5% of unadjusted basis (UBIA) of qualified property. A sole proprietor with no employees and no real estate often gets ZERO QBI deduction above the threshold under this rule. Solution: hire employees, or buy/depreciate property.

Yes. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made the Section 199A QBI deduction permanent by removing the TCJA sunset that would otherwise have ended it after 2025. There is no longer a scheduled expiration date, so you no longer need to accelerate pass-through income to capture the deduction before a deadline - it remains available in 2026 and beyond under current law.

QBI is the net ordinary income, gains, deductions, and losses from a U.S. pass-through business. It does not include the W-2 wages the business pays you, capital gains and losses, dividend income, or investment interest.

Yes, under certain conditions. A rental real estate activity can count as a business for Section 199A purposes if it meets the 250-hour safe harbor in Rev. Proc. 2019-38, or if it otherwise rises to the level of a trade or business under Section 162.