QBI Deduction (Section 199A) Calculator

Legal basis: IRC §199A (qualified business income deduction); IRC §199A(d)(2) (specified service trade or business); Form 8995 / 8995-A · checked 2026-10-04 · Rates and limits change — verify the current figures.

The qualified business income (QBI) deduction under IRC §199A lets eligible owners of pass-through businesses — sole proprietors, partnerships, S corporations, and some trusts — deduct up to 20% of their qualified business income. It is an individual-level deduction claimed on Form 1040, and because it reduces taxable income without reducing adjusted gross income, it works whether or not you itemize. Qualified business income is generally the net profit of the business allocated to you, excluding capital gains, interest income not earned in the business, and reasonable W-2 wages you paid yourself through an S corporation.

The basic formula is simple: 20% of the lesser of your qualified business income or your taxable income before the QBI deduction (computed without the net operating loss deduction). A separate overall cap keeps the deduction below 20% of taxable income minus net capital gains. The complication arrives above a threshold amount of taxable income. There, two tests begin to matter: whether the business is a specified service trade or business (SSTB) — health, law, accounting, consulting, financial services, athletics, and similar fields — and whether the business pays significant W-2 wages or holds qualified business property.

Above the threshold, an SSTB's deduction phases out over a phase-in range (roughly $50,000 single / $100,000 joint in recent years), disappearing entirely once taxable income exceeds the top of that range. A non-SSTB keeps its deduction but becomes subject to the wage-and-capital limit: the deduction cannot exceed the greater of 50% of W-2 wages paid by the business, or 25% of W-2 wages plus 2.5% of the unadjusted basis (UBIA) of qualified business property. Both limits apply gradually during the phase-in range.

The threshold and phase-in range are indexed annually and the deduction itself is scheduled to expire under current law after 2025 unless extended, so this calculator makes them editable inputs. Enter the current-year figures from the Form 8995 instructions, and treat the result as an educational estimate to confirm with a CPA — the SSTB definitions and wage computations are where real returns get audited.

This calculator is an educational estimate, not tax advice. The threshold and phase-in range are indexed annually, the SSTB and wage-limit rules involve many detailed definitions this tool simplifies, and the provision's continuation depends on legislation. Confirm current-year figures with the IRS Form 8995 instructions or a CPA.