Updated June 17, 2026
Estimate your QBI deduction
The full Section 199A calculation with W-2 wage limits, SSTB phase-outs, and the taxable-income cap. Educational estimate only. Consult a qualified CPA for your situation.
Section 199A operates in three zones. Below the lower threshold, the deduction is 20 percent of QBI, capped at 20 percent of taxable income minus capital gains. Between the thresholds, W-2 wage limits and SSTB restrictions phase in gradually. Above the upper threshold, SSTB owners receive no deduction; non-SSTB owners face the full W-2 wage limit with no phase-in cushion. Thresholds adjust annually for inflation. The figures here are reference points; confirm current-year figures with the IRS or a CPA. This is educational information, not tax advice.
2026 threshold figures (verified against IRS Rev. Proc. 2025-32)
For 2026, the lower threshold is $201,750 for single filers and $403,500 for married filing jointly. The phase-in range runs $75,000 (single) or $150,000 (MFJ) above those figures, widened for 2026 under the One Big Beautiful Bill Act (P.L. 119-21), placing the upper threshold at $276,750 (single) or $553,500 (MFJ). Married filing separately uses $201,775 and $276,775. These figures come from IRS Rev. Proc. 2025-32, published October 9, 2025. The IRS publishes updated thresholds each fall in a Revenue Procedure; see the 2026 QBI Deduction Thresholds Reference for the full table and methodology.
What happens in the phase-out range
Between the lower and upper thresholds, the W-2 wage restriction (for non-SSTBs) and the deduction reduction (for SSTBs) phase in based on the fraction of the range your income has entered. If you are 40 percent through the range, 40 percent of the applicable limit applies. Form 8995-A handles the mechanics on the actual return. The QBI calculator applies the phase-in math automatically, so you can see the impact without working through the worksheet yourself.
The W-2 wage limit above the threshold
For non-SSTB businesses above the upper threshold, the deduction is limited to the greater of: (a) 50 percent of the W-2 wages paid by the business, or (b) 25 percent of W-2 wages plus 2.5 percent of the unadjusted basis of all qualified depreciable property. A sole proprietor with no payroll and no depreciable assets can end up with a $0 deduction above the threshold regardless of how large the QBI is. Property-heavy businesses (rental real estate, manufacturing) often fare better under prong (b). See how to calculate the deduction.
The SSTB phase-out above the threshold
For SSTB owners, the deduction is reduced proportionally within the phase-in range and reaches zero at the upper threshold. There is no wage-limit alternative. Once income clears the upper threshold, the deduction is gone regardless of what the business pays in wages. See what is an SSTB to understand which businesses are affected, including the two notable exceptions: engineering and architecture.
Overall taxable income limit
Even after passing every other test, the QBI deduction cannot exceed 20 percent of taxable income minus net capital gains and qualified dividends. The cap prevents the deduction from reducing taxable income below zero and limits the benefit to what a straight 20 percent rate cut on business income would produce, no more.
Estimate your QBI deduction
The full Section 199A calculation with W-2 wage limits, SSTB phase-outs, and the taxable-income cap. Educational estimate only. Consult a qualified CPA for your situation.