Updated June 17, 2026
Estimate your QBI deduction
Full Section 199A calculation with W-2 wage limits, SSTB phase-outs, and taxable-income cap. Educational estimate only. Consult a qualified CPA for your specific situation.
Section 199A allows eligible taxpayers to deduct up to 20 percent of qualified business income from a pass-through entity (sole proprietorship, S corporation, partnership, or certain trust), subject to income thresholds, W-2 wage limits, and restrictions on specified service businesses. Tax law changes. The thresholds and rules described here reflect information available as of mid-2026. Consult a qualified CPA before making tax decisions. This is educational information, not tax advice.
Note: Section 199A was added by the Tax Cuts and Jobs Act of 2017. Section 70105 of the One Big Beautiful Bill Act (P.L. 119-21, enacted July 2025) made the deduction permanent starting in 2026, so it is no longer scheduled to expire. Always verify current status with the IRS or a tax professional.
Who gets the QBI deduction
The deduction is available to individual taxpayers with qualified business income from a pass-through entity: sole proprietors (Schedule C filers), S corporation shareholders, partners in partnerships, and certain trusts and estates. C corporations have their own rate structure and are not eligible. W-2 employees cannot claim it, not even on the salary from a business they also own as a pass-through. See who qualifies for the QBI deduction for the full picture.
What counts as qualified business income
QBI is the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business. In practice: net profit from U.S. business operations. It excludes wages paid to an S corporation shareholder-employee, capital gains, interest income not allocable to the business, and certain other items. Rental income may qualify, but only if the rental activity rises to the level of a trade or business. See QBI deduction for rental property for that analysis.
The basic 20 percent calculation
At the simplest level, the deduction is 20 percent of QBI, capped at 20 percent of taxable income minus net capital gains. For taxpayers below the income threshold (which adjusts annually), this is all there is to it. No W-2 test. No SSTB restriction. Just 20 percent of QBI and the cap. See how to calculate the QBI deduction for the full mechanics including above-threshold cases.
How income levels change the calculation
Above the income threshold, two additional limits activate: the W-2 wage and unadjusted basis limitation. For specified service trades or businesses (SSTBs), the deduction phases out entirely above the upper threshold. A solo consultant earning well above the threshold, for instance, may end up with a $0 deduction despite significant QBI. See income thresholds and phase-outs for the full mechanics.
The deduction is taken on Form 8995 or 8995-A
Most taxpayers below the threshold with a single business use Form 8995. Those above the threshold, or with multiple businesses or aggregation elections, use Form 8995-A. The deduction reduces taxable income but is not subtracted from adjusted gross income. It is a below-the-line deduction, available whether you itemize or take the standard deduction. (That is one of the more frequently misunderstood points about this rule.) Use the QBI deduction calculator to estimate your amount before preparing your return.
Estimate your QBI deduction
Full Section 199A calculation with W-2 wage limits, SSTB phase-outs, and taxable-income cap. Educational estimate only. Consult a qualified CPA for your specific situation.