Section 199A QBI Deduction Calculator — 2026

The 20% qualified business income deduction under § 199A is one of the largest tax breaks available to pass-through business owners — worth up to $80,700 for a $403K MFJ income before the phaseout begins. The OBBBA (July 2025) made it permanent. But your actual deduction depends on your income level, whether your business is a "specified service" (SSTB), and what wages your business pays. This calculator estimates your 2026 deduction.

Filing status

Qualified business income (QBI) from your pass-through business Your business's net profit flowing to your personal return — S-corp K-1 Box 1, Schedule C net profit, or partnership distributive share. For S-corps: use the K-1 amount after your W-2 salary.

Other taxable income (non-business) Spouse's W-2, interest, ordinary dividends, rental income, etc. — any income taxed as ordinary income that is not from this business. Do not include long-term capital gains.

Business type SSTB = "Specified Service Trade or Business." The IRS defines it as any business where the principal asset is the skill or reputation of its employees. See below for examples.

W-2 wages paid by business Total wages your business paid in 2026 — including your own W-2 salary if you're an S-corp owner. Leave 0 if sole proprietor or single-member LLC with no employees. This number only affects the result when your income exceeds the phaseout threshold.

Qualified property — UBIA (optional) Unadjusted basis immediately after acquisition of depreciable tangible business property — equipment, machinery, vehicles, owned buildings used in the business. Leave 0 if your business is primarily services with no major depreciable assets.

How the § 199A Deduction Works

The deduction equals 20% of your qualified business income — but that's before the three rules that can reduce it:

Three rules that affect the deduction:

The income threshold. Below $201,775 (single) / $403,500 (MFJ) in 2026,¹ the deduction is straightforward: 20% of QBI, no further limits. Above the threshold, the W-2 wage limitation kicks in for all businesses, and the SSTB phaseout eliminates service-business deductions entirely above the upper limit.
The SSTB phaseout. If your business is a "specified service" (consulting, law, health, financial services, accounting), the deduction phases out as income rises from the threshold to the upper limit ($276,775 single / $553,500 MFJ in 2026). Above the upper limit: zero deduction for SSTBs.
The W-2 wage limitation. Above the threshold, your deduction can't exceed the greater of: (a) 50% of W-2 wages paid by the business, or (b) 25% of wages plus 2.5% of the unadjusted basis of qualified property. This is why high-income owners benefit from S-corp election — the salary creates W-2 wages that preserve the deduction.

The OBBBA also added a $400 minimum deduction² for 2026: if your QBI is at least $1,000 and you materially participate, you receive at least $400 even when the phaseout would otherwise eliminate the benefit.

SSTB vs. Non-SSTB: What's the Difference?

This distinction is probably the most important thing to understand about § 199A planning.

Business type	Examples	2026 above threshold
Non-SSTB	Software products, manufacturing, real estate, restaurants, retail, construction, technology companies	Deduction limited to W-2 wage / property test — but survives in some form
SSTB	Consulting, financial advisory, law, medicine, dentistry, accounting, actuarial services, athletics, performing arts, brokerage	Deduction phases to zero above $553,500 MFJ (2026) — completely eliminated

The "reputation or skill" catch-all: the IRS defines SSTB broadly. If your business' value is primarily your personal expertise and relationships — rather than a product, system, or physical asset — it's likely an SSTB. Consulting firms, advisory businesses, and professional practices typically qualify.

The SSTB cliff: why high-income service business owners need to plan carefully

For an SSTB owner with $500K of income and no W-2 wages (sole proprietor / single-member LLC), the deduction is roughly $40,000 at the threshold — and drops sharply above it. Once income exceeds $553,500 MFJ, the deduction is zero.

The key levers: (1) S-corp election creates W-2 wages that partially preserve the deduction within the phaseout range. (2) Maxing out retirement plan contributions (Solo 401(k), Cash Balance) reduces taxable income, potentially keeping you below the threshold. A business owner netting $500K who contributes $200K to a defined benefit plan could bring QBI-relevant income well below the $403,500 threshold.

Planning Strategies to Maximize Your § 199A Deduction

1. Keep income below the threshold (SSTB owners especially)

The cleanest way to preserve the full 20% deduction is to ensure your taxable income stays below $201,775 (single) / $403,500 (MFJ). The levers:

Solo 401(k): up to $70,000 in employer + employee contributions in 2026 ($78,000 if age 50+; $81,250 if ages 60-63 with super catch-up)³
Cash Balance plan: can contribute $100,000–$300,000+/year depending on age, reducing taxable income significantly
Defined Benefit plan: for older, high-earning owners, actuarially determined contributions can exceed $250,000/year
Health insurance deduction: self-employed health insurance premiums reduce AGI (and thus taxable income) dollar-for-dollar

2. S-corp election to create W-2 wages (above-threshold income)

If your income is above the phaseout threshold, W-2 wages are the key to preserving a non-SSTB deduction or limiting the SSTB reduction. For an S-corp owner with $600K business income and a $150K salary:

QBI = $600K − $150K W-2 = $450K
Tentative deduction = 20% × $450K = $90K
W-2 wage limit = 50% × $150K = $75K
Deduction (non-SSTB above upper): $75K
vs. sole proprietor with same $600K, no wages: $0 (no W-2 wages → limit = $0)

3. Qualified property basis for capital-intensive businesses

The property alternative (25% × W-2 wages + 2.5% × UBIA) benefits capital-intensive businesses: manufacturers, commercial real estate operators, equipment-heavy service businesses. A business with $10M of qualified property can add $250,000 to the wage+property limit even with relatively modest wages.

4. Splitting SSTBs from non-SSTBs

If you own both a consulting practice (SSTB) and a software product company (non-SSTB), these are separate trades or businesses under § 199A. The SSTB phaseout applies only to the SSTB income. Properly separating them — with separate books and entities — preserves the non-SSTB deduction. This requires actual separate operations, not just paper splitting.

Get matched with a § 199A specialist

QBI planning is interconnected with your entity structure, retirement plan strategy, and exit plan. A specialist advisor can model the exact deduction under different scenarios — including the interaction between S-corp salary, retirement contributions, and the phaseout range.

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Frequently Asked Questions

Does the deduction apply to C-corps?

No. Section 199A applies only to pass-through income — sole proprietors, single-member LLCs, S-corps, and partnerships. C-corp income is taxed at the corporate level (currently 21%), and dividends paid to shareholders are not QBI.

Does rental income qualify?

Rental real estate can qualify as QBI under § 199A if it rises to the level of a "trade or business." A safe harbor (Revenue Procedure 2019-38) provides that rental activities qualify if the owner maintains separate books and records and provides at least 250 hours of rental services per year. Triple-net (NNN) leases generally don't qualify.

What counts as W-2 wages for the wage limitation?

W-2 wages for § 199A purposes means total wages reported on Forms W-2 issued by the business — including both employer and employee FICA portions. For S-corp owners, your own W-2 salary from the S-corp counts. Guaranteed payments to LLC partners do NOT count as W-2 wages for this purpose.

Is the $400 minimum deduction significant?

For most high-income business owners, the $400 minimum (new under OBBBA for 2026²) is minor. Its primary benefit is for lower-income business owners whose calculation might round to zero — it ensures any active business owner with meaningful QBI receives at least some benefit.

Does the deduction affect self-employment tax?

No. Section 199A reduces federal income tax but does not reduce self-employment (SE) tax, which is based on net self-employment income, not taxable income. SE tax is calculated on Schedule SE before the QBI deduction is applied.

IRS Rev. Proc. 2025-32 (October 2025): 2026 inflation adjustments — QBI deduction phaseout thresholds: $201,775 (single), $403,500 (MFJ); phaseout ranges expanded to $75,000/$150,000 per One Big Beautiful Bill Act (OBBBA, Pub. L. 119-xx, July 4, 2025). IRS Rev. Proc. 2025-32 (PDF)
OBBBA § 199A(a)(2): $400 minimum deduction for taxable years beginning after Dec. 31, 2025, if QBI ≥ $1,000 and taxpayer materially participates. Indexed for inflation in subsequent years. See Warren Averett — OBBBA QBI changes
Solo 401(k) 2026 limits: $24,500 employee deferral ($8,000 catch-up age 50+; $11,250 super catch-up ages 60-63 per SECURE 2.0); up to 25% of W-2 compensation employer profit-sharing; combined limit $70,000 ($78,000 age 50+; $81,250 ages 60-63). IRS 2026 Tax Adjustments
IRS § 199A overview: Qualified Business Income Deduction — IRS.gov

Tax values verified as of April 2026 against IRS Rev. Proc. 2025-32 and OBBBA (July 2025).