QBI Deduction Calculator

Understanding the Section 199A QBI Deduction

The Qualified Business Income (QBI) deduction, also known as the Section 199A deduction, allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income from pass-through entities such as sole proprietorships, partnerships, S corporations, and some trusts and estates.

How the QBI Deduction Works

At its simplest, the deduction equals 20% of your qualified business income. However, above certain income thresholds the deduction may be limited based on W-2 wages paid by the business, the unadjusted basis of qualified property (UBIA), and whether your business is classified as a specified service trade or business (SSTB).

Income Thresholds and Phase-Outs

• Single / MFS / Head of Household: Full deduction below $191,950; phase-out between $191,950 and $241,950
• Married Filing Jointly: Full deduction below $383,900; phase-out between $383,900 and $483,900

If your taxable income (before the QBI deduction) is below the lower threshold, you receive the full 20% deduction with no additional limitations. Above the upper threshold, SSTB owners lose the deduction entirely, while non-SSTB owners must meet the W-2 wage and UBIA tests.

SSTB vs. Non-SSTB Businesses

Specified service trades or businesses (SSTBs) include fields such as law, accounting, medicine, consulting, athletics, financial services, and performing arts. If your business is an SSTB and your income exceeds the upper threshold, the QBI deduction is completely phased out. Non-SSTB businesses retain the deduction but are subject to W-2 wage and UBIA limits.

W-2 Wage and UBIA Limitations

For higher-income non-SSTB taxpayers, the QBI deduction is limited to the greater of:

• 50% of W-2 wages paid by the qualified business, or
• 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property

These limitations encourage business owners to employ workers and invest in capital equipment. If you have no employees and no qualified property, your deduction above the threshold may be reduced to zero.