QBI Deduction Calculator
(Section 199A)

How §199A actually works (the short version)

Three income zones determine your QBI deduction:

1. Below the threshold — simple 20%

If your taxable income (before QBI deduction) is at or below the threshold, your QBI deduction is the lesser of 20% × QBI or 20% × (Taxable Income − Net Capital Gains). No wages or UBIA test, SSTB status doesn't matter. Form 8995 (simplified) handles this.

2. In the phase-in range — partial deduction, mechanics matter

The wages/UBIA test phases in linearly for non-SSTBs. For SSTBs, the QBI itself, wages, and UBIA all phase out linearly — at the top of the range, an SSTB gets nothing. The 2026 OBBBA expanded these ranges: single went from $50K wide to $75K wide; MFJ went from $100K wide to $150K wide.

3. Above the phase-out — wages/UBIA test applies fully (non-SSTB only)

Non-SSTB businesses get the lesser of 20% × QBI or the greater of:

· 50% × W-2 wages paid
· 25% × W-2 wages + 2.5% × UBIA of qualified property

SSTBs get $0 above the phase-out — except for the new OBBBA $400 minimum if material participation + QBI ≥ $1,000 (effective 2026).

What's an SSTB?

Per IRC §199A(d)(2), a Specified Service Trade or Business includes:

Notably not SSTBs: engineering, architecture, software development, real estate (generally), most manufacturing, and most retail.

Strategies for SSTB owners above the threshold

· Defer income into the next year to stay below threshold (Section 199A is income-based, not business-based).
· Increase retirement contributions — Solo 401(k), SEP-IRA, defined benefit plans reduce taxable income.
· Bunch deductions in years where SSTB phase-out is binding (large charitable contributions, etc.).
· Separate non-SSTB activities into a different entity if the activity has its own economic substance (e.g., a real estate holding company for the building separate from the SSTB operating company).
· Aggregate eligible non-SSTBs (per Reg. §1.199A-4) to combine wages/UBIA across related businesses for the wages cap test.