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QBI Deduction Calculator 2026

Your 2026 qualified business income deduction: the 20% base, taxable-income limit, the $201,750 / $403,500 threshold and $75,000 / $150,000 phase-in, SSTB and W-2 wage / property limits, the new $400 minimum and the federal tax saved.

✅ Figures verified. 2026 §199A thresholds ($201,750 single / $403,500 joint) and the widened $75,000 / $150,000 phase-in ranges confirmed against Rev. Proc. 2025-32 §4.24 on 8 October 2026; the 20% rate, W-2/UBIA limits and the new $400 minimum deduction are statutory (P.L. 119-21).
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20% of QBI—
Where you sit against the threshold—
SSTB treatment—
W-2 / property limit—
Overall limit (20% of taxable income less capital gains)—
QBI deduction—
Federal tax saved—
Effective rate on business income—

In short

The qualified business income deduction is 20% of net income from a sole proprietorship, partnership, S corporation or rental business, limited to 20% of taxable income minus capital gains. In 2026 it is unrestricted below $201,750 of taxable income ($403,500 joint); over a $75,000 / $150,000 phase-in range the W-2 wage and property limits apply and specified service businesses lose the deduction entirely. The 2025 law made it permanent and added a $400 minimum.

Who this is for: US sole proprietors, S-corp and partnership owners, freelancers and landlords estimating the 20% pass-through deduction.

Not tax or legal advice. Simplified Form 8995-A computation for one business; aggregation, losses carried forward, REIT/PTP income and the patron reduction are not modelled.
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How the 20% QBI deduction works in 2026

  • Basic rule: deduct 20% of qualified business income, limited to 20% of taxable income minus net capital gains. It reduces income tax only — not self-employment tax.
  • Threshold: $201,750 of taxable income ($403,500 joint) in 2026. Below it, every business gets the full 20%, including service businesses.
  • Phase-in range: $75,000 ($150,000 joint) above the threshold. Inside it, the W-2 wage / property limit phases in and SSTB income is progressively excluded.
  • Above the range ($276,750 / $553,500): the deduction cannot exceed the greater of 50% of W-2 wages paid or 25% of wages plus 2.5% of the original cost of qualified property; SSTBs get nothing.
  • Minimum deduction: from 2026, active businesses with at least $1,000 of QBI get at least $400.
  • Planning: near the threshold, retirement contributions, HSA and bunching deductions can drop taxable income under it and restore the full 20%; S-corp owners trade salary (which reduces QBI) against the wage limit.

See also: Home Office Deduction Calculator.

Sources: Rev. Proc. 2025-32 §4.24; IRS — Qualified business income deduction. Checked 8 October 2026.

Assumptions

  • Deduction = min(20% × QBI, 20% × (taxable income − capital gains)), with the W-2 / UBIA limit phased in over the $75,000 / $150,000 range above the threshold.
  • SSTB income and wage limit reduced proportionally through the range; none above it.
  • $400 minimum applies when QBI ≥ $1,000 (not for SSTBs above the range); one business only.

Worked example

Single consultant (SSTB), QBI $150,000, taxable income $170,000, no capital gains

20% of QBI is $30,000. Taxable income is below the $201,750 threshold, so the SSTB rule and wage limit do not apply. The overall limit is 20% × $170,000 = $34,000, so the deduction is the full $30,000, saving about $7,200 at 24%. The effective top rate on the consulting income falls from 24% to about 19.2%. If taxable income rose to $239,250 — halfway through the phase-in range — only half the QBI would count and the wage limit would be half applied; at $276,750 the deduction would be zero.

Frequently asked questions

What is the QBI threshold for 2026?

$201,750 of taxable income for single filers and $403,500 for joint filers, with phase-in ranges of $75,000 and $150,000 above those figures.

Does the QBI deduction reduce self-employment tax?

No — it reduces taxable income for income tax only. SE tax is computed on net profit before the deduction.

What is a specified service trade or business?

Health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, investing and any business whose main asset is the reputation or skill of its owners. Engineering and architecture are excluded from the list.

Does rental income qualify?

Yes if the rental is a trade or business (the 250-hour safe harbour helps) or is rented to your own business; triple-net leases usually do not.

Do S-corp owner wages count as QBI?

No — your own W-2 salary is excluded from QBI, but it does count toward the W-2 wage limit above the threshold.

Does the deduction apply to capital gains from the business?

No — capital gains, dividends and interest are excluded from QBI and also reduce the taxable-income limit.

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Written by the Swift IT Sols editorial team · SWIFT SOLSRules sourced from the official authorities named on this page and last checked How we source and check calculators

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