The Qualified Business Income deduction (IRC §199A) gives owners of pass-through businesses up to a 20% deduction on qualified business income. For 2026, the deduction phases out for "Specified Service Trade or Business" (SSTB) owners when taxable income exceeds ~$250K single / ~$500K MFJ. Non-SSTBs face W-2 wage and UBIA limitations at the same thresholds. This calculator shows where you stand and how to plan around it.
Five inputs. We'll compute your deduction, where you sit in the phase-out, and your federal tax savings.
QBI planning is one of 60+ moves in the playbook. S-Corp election, Solo 401(k), Augusta Rule, Accountable Plan, Cost Seg, §83(b), Backdoor Roth — each with calculator + source link + implementation steps.
QBI planning interacts with retirement contributions, S-Corp comp, charitable giving, and capital gains harvesting. A 15-minute Discovery Call walks through which levers apply. Free. No pitch.
Book a free 15-min call →Before 2018, business income from pass-through entities (sole prop, partnership, S-Corp, LLC) was taxed at the owner's marginal rate without a special deduction. The Tax Cuts and Jobs Act of 2017 created §199A — a 20% deduction on Qualified Business Income — to bring pass-through tax treatment closer to the new 21% C-Corp rate.
Below the threshold, every owner of a pass-through gets the full 20% — no questions asked. Above the threshold, two limitations kick in depending on business type:
| Filing status | Phase-out starts | Phase-out completes |
|---|---|---|
| Single / HOH | ~$250,000 | ~$300,000 |
| Married Filing Jointly | ~$500,000 | ~$600,000 |
Inflation-adjusted: 2024 thresholds were $241,950 single / $483,900 MFJ. 2026 numbers above are projected based on CPI; your tax software will use the actual figure. Treat these as planning estimates.
If your business is an "Specified Service Trade or Business" (defined in §199A and Treas Reg §1.199A-5), the deduction fully phases out above the upper threshold. Below threshold: 20%. In phase-out range: prorated reduction. Above upper threshold: $0.
The classic SSTB hit: consulting practices at $400K-$600K of business profit lose the full deduction at MFJ taxable income $600K+. That's potentially $50K-$100K in lost tax savings.
Non-SSTBs above the threshold face a W-2 wage limitation: the deduction is capped at the GREATER of (a) 50% of W-2 wages paid by the business, OR (b) 25% of W-2 wages + 2.5% of UBIA (unadjusted basis of qualified property). Most service businesses with no employees lose most/all of the deduction here. Capital-intensive businesses (real estate with depreciable property) often still preserve it via UBIA.
Per §199A(d)(2): health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing/investment management, trading, dealing in securities, OR any trade where the principal asset is the reputation/skill of one or more employees. Real estate brokers are explicitly NOT SSTB; insurance brokers are NOT SSTB (specific carve-outs).
QBI = net income from the qualified business, excluding: investment income (interest, dividends, capital gains), reasonable compensation paid to S-Corp owner-shareholders, guaranteed payments to partners, foreign-source income. For sole props and partnerships, QBI ≈ net SE income. For S-Corps, QBI = K-1 income MINUS your W-2 owner-comp.
No — it's a "below-the-line" deduction taken after AGI. It reduces taxable income but doesn't affect AGI-based phase-outs (IRMAA, IRA contribution limits, NIIT exposure, etc.).
Yes — keep TI below the threshold. Best levers: max retirement contributions, charitable giving, HSA, defer billable revenue, accelerate deductible expenses. A $20K reduction in TI from $510K → $490K (MFJ) can preserve the full 20% deduction on $200K QBI = $40K deduction × 32% bracket = $12,800 saved.
QBI is calculated separately for each trade or business. SSTBs are tested separately from non-SSTBs. Owners can "aggregate" multiple businesses under §1.199A-4 in some cases (same TIN, similar product/service, 50% common ownership) — useful for non-SSTBs to combine W-2 wage pools.
No — §199A is scheduled to expire after Dec 31, 2025. The 2025 reauthorization extended it for many provisions; check with your CPA on the current status. Plan for permanence at your own risk.
No — QBI is an income tax deduction only. SE tax is calculated on net SE income BEFORE the QBI deduction. This is why S-Corp election (which reduces SE base via W-2/distribution split) and QBI optimization work together — they hit different tax bases.
QBI is one of 60+ moves in the Good Deals owner workbook. Walk through what applies, see your annual + lifetime savings, and decide what to act on — all in 90 minutes with a CFA Charterholder + Investment Adviser.
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Good Deals is the planning workbook + advisory practice of Andrew Escher, CFA Charterholder + Investment Adviser Representative based in Austin, TX. Independent stack: Altruist for investment custody, BackNine for insurance placement, Good Deals for the planning layer that ties them together.
We work with solo professionals, agency owners, and business owners at $300K–$5M in revenue who want structural tax planning, an Investment Policy Statement, and a long-arc Roadmap — without the typical AUM-fee pitch.