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; expires Dec 31, 2026. 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, consulting, financial services, performing arts, athletics, and any business whose principal asset is reputation/skill. SSTBs lose the QBI deduction entirely once taxable income exceeds $241,950 single / $483,900 MFJ in 2026 (phase-out range above those). 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.

Uncertain. The deduction is popular with small-business advocates but expensive (~$50B/year in revenue loss). House Republicans have proposed making it permanent; Senate proposals vary. Plan as if it expires, but file for any years it remains in force. Defer pass-through income from 2026 to 2027 only if you expect TCJA full sunset - otherwise accelerating to 2026 (with QBI active) is usually the safer bet.