The Section 199A QBI deduction lets pass-through business owners deduct up to 20% of qualified business income. Calculate your 2026 deduction with W-2 wage and income limits applied.
QBI Deduction Inputs — 2026
How to Calculate the QBI Deduction in 2026
This QBI deduction calculator applies the Section 199A rules for 2026, including income phase-outs, W-2 wage limitations, and SSTB restrictions.
Below the Phase-Out Threshold
If your taxable income is below $197,300 (single) or $394,600 (MFJ) in 2026, you deduct the lesser of 20% of QBI or 20% of taxable income minus net capital gains. This is straightforward and available to all non-SSTB businesses and even some SSTBs below the threshold.
Above the Phase-Out Threshold
Above the threshold, the W-2 wage limitation kicks in. Your 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 qualified property. S-corp owners who pay themselves reasonable wages can use those wages for this calculation.
S-Corp Strategy Implications
For high-income S-corp owners, paying yourself a higher salary increases the W-2 wage limitation, potentially allowing a larger QBI deduction — sometimes more than offsetting the higher SE taxes. This is why the S-corp salary question is complex and requires comparing multiple scenarios.
FAQ
What is the QBI deduction?
The Qualified Business Income (QBI) deduction under Section 199A allows owners of pass-through businesses (sole proprietorships, partnerships, S-corps, some trusts) to deduct up to 20% of their qualified business income from their taxable income. It was created by the Tax Cuts and Jobs Act of 2017 and is set to expire after 2025 unless extended by Congress.
Who qualifies for the QBI deduction in 2026?
Most pass-through business owners qualify at lower income levels. For 2026, the phase-out begins at approximately $197,300 for single filers and $394,600 for married filing jointly (inflation-indexed). Above these thresholds, the deduction may be limited by W-2 wages paid and qualified property owned. Specified service businesses (attorneys, consultants, financial advisors) phase out completely.
What is the W-2 wage limitation?
Above the income threshold, your QBI deduction cannot exceed the greater of: 50% of W-2 wages paid by the business, or 25% of W-2 wages + 2.5% of qualified unadjusted basis of depreciable property. This limits the deduction for businesses that pay little or no wages (like solo operators or real estate investors).
What are specified service trades or businesses?
SSTBs include: health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, and any business where the principal asset is the reputation or skill of its employees. Engineers and architects were removed from the SSTB list. SSTBs phase out the deduction at higher incomes.
Is this calculator free?
Yes, completely free with no signup required. For educational purposes only — QBI deduction rules are complex. Consult a tax professional. 2026 thresholds are estimated based on inflation adjustments.