QBI Deduction Calculator — Section 199A for Tax Year 2026
Estimate your 2026 qualified business income deduction. Handles below-threshold, phase-in range, and above-threshold cases including SSTB phase-out and W-2 wages limitation. Results update instantly.
Planning estimate only — not tax advice. See Disclaimer.
What the QBI Deduction Actually Does
The Section 199A qualified business income deduction lets owners of pass-through businesses deduct up to 20 percent of qualified business income on their personal federal return. The deduction was created by the Tax Cuts and Jobs Act and was originally scheduled to sunset on December 31, 2025. The One Big Beautiful Bill Act, enacted in 2025, made the deduction permanent and widened the phase-in window above the threshold.
The math depends on where your total taxable income falls relative to the 2026 inflation-adjusted threshold under Revenue Procedure 2025-32: $201,750 for single filers and $403,500 for joint filers. Below the threshold, the deduction is a clean 20 percent of QBI. Above the threshold, two limitations kick in — a W-2 wages and unadjusted-basis limit for any pass-through, and a separate phase-out that reaches zero deduction for owners of specified service trades or businesses (SSTBs) once they cross the top of the phase-in range.
For NJ business owners the QBI deduction is a federal-only item. New Jersey does not conform to Section 199A — your NJ Gross Income Tax bill is unchanged. The federal benefit is still substantial when stacked with the NJ BAIT election and, where eligible, the federal S-Corp election.
Your Numbers
2026 thresholds: single $201,750 (phase-in top $276,750); MFJ $403,500 (phase-in top $553,500).
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Net qualified business income from your pass-through (Schedule C profit, S-Corp ordinary income on K-1, partnership ordinary income on K-1, etc.). Excludes wages, guaranteed payments, capital gains, dividends, and interest.
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Your household taxable income computed before the QBI deduction is applied (Form 1040 line 15 conceptually, before QBI). Determines whether you are below the threshold, in the phase-in range, or above.
Health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, investment management, trading, dealing in securities, or any business whose principal asset is the reputation or skill of one or more employees or owners. Engineering and architecture are NOT SSTBs.
Only relevant above the threshold:
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Total W-2 wages paid by the business during the tax year, including owner-employee wages from an S-Corp. Sole proprietors with no employees enter 0.
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Unadjusted basis immediately after acquisition of depreciable tangible property held by the business at year-end and within its depreciable period. Real estate and equipment count; goodwill and other intangibles do not.
Estimate only — not a tax position.
The figure below is computed from the values you entered, simplified assumptions, and the federal Section 199A figures in effect for tax year 2026 as of 2026-05-07. It is not tax advice and does not create a CPA-client relationship. It does not capture facts specific to your return, business aggregation under Treas. Reg. 1.199A-4, REIT/PTP income, or the net-capital-gains adjustment to the taxable income cap. Do not act on this number, file based on it, or include it in a tax position without a licensed tax professional reviewing your full situation. ProAxis Tax & Accounting Services makes no warranty as to accuracy and accepts no liability for reliance on this output. See full Disclaimer and Terms of Service.
Estimated 2026 QBI Deduction
Your Bracket
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Tentative Deduction (20% × QBI)
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Before threshold limitations
Estimated 2026 QBI Deduction
$0
Estimate as of 2026-05-07
After all applicable limitations
Important: This Is a Directional Estimate
The calculator uses 2026 figures from IRS Revenue Procedure 2025-32: threshold of $201,750 for single filers and $403,500 for married filing jointly, with phase-in window of $75,000 single and $150,000 MFJ per IRC section 199A(b)(3)(B)(i) as widened by the One Big Beautiful Bill Act.
The 20 percent deduction rate is set by IRC section 199A(a)(2). The OBBBA proposal to raise the rate to 23 percent did not pass — the rate remains 20 percent for tax year 2026.
The calculator caps the deduction at 20 percent of your entered taxable income, which approximates the statutory cap of 20 percent of (taxable income minus net capital gains and qualified dividends). If you have significant capital gains, the actual cap is lower than what this calculator shows.
Above the threshold, the calculator applies the W-2 wages limitation as the greater of 50 percent of W-2 wages or 25 percent of W-2 wages plus 2.5 percent of UBIA, per IRC section 199A(b)(2)(B). Within the phase-in range the limitation is phased in linearly.
For SSTB owners in the phase-in range, the calculator reduces QBI, W-2 wages, and UBIA by the applicable percentage (one minus the ratio of taxable income above threshold to the phase-in window), then applies the standard W-2 phase-in to the reduced amounts. SSTB owners at or above the top of the phase-in range receive zero deduction.
The calculator does not model qualified REIT dividends or publicly traded partnership income (which have a separate computation), business aggregation under Treasury Regulation section 1.199A-4, the qualified BDC dividend rules, or trust-and-estate-level QBI. Form 8995-A Schedule A and Schedule B alternative computations are also out of scope.
New Jersey does not conform to Section 199A. The QBI deduction reduces only federal taxable income — your NJ Gross Income Tax bill is unchanged by the deduction.
For a precise figure tailored to your entity structure and personal return, schedule a free consultation with ProAxis. The full QBI analysis is part of every pass-through tax planning engagement at ProAxis.
Worked Example 1 — Below the Threshold (Most Small Owners)
A NJ sole proprietor running a marketing consultancy as a single-member LLC. QBI of $80,000. Total household taxable income before QBI deduction of $120,000. Filing single. Below the $201,750 threshold.
Tentative deduction: 20 percent of $80,000 = $16,000.
Taxable income cap: 20 percent of $120,000 = $24,000. The tentative deduction is the smaller of the two, so the cap is not binding.
Final deduction: $16,000. Note that even though marketing consulting is technically an SSTB, the SSTB phase-out only applies above the threshold. Below the threshold every eligible pass-through gets the full 20 percent — no W-2 limitation, no SSTB carve-out.
Worked Example 2 — SSTB in Phase-In Range
A NJ-based attorney running a solo law practice as an S-Corp. QBI of $200,000 after paying themselves a reasonable W-2 salary. Household taxable income (before QBI) of $250,000. Filing single. Law firm is an SSTB.
Position in phase-in range: $250,000 taxable income is $48,250 above the $201,750 threshold, which is 64.33 percent through the $75,000 phase-in window. Applicable percentage for SSTB items is therefore 35.67 percent.
Reduced items: QBI used is $200,000 × 35.67 percent = $71,333. W-2 wages used is whatever the firm paid (assume $50,000 reasonable salary) × 35.67 percent = $17,833.
Tentative on reduced items: 20 percent of $71,333 = $14,267. W-2 limit (50 percent of reduced wages) = $8,917. Excess of tentative over limit = $5,350.
Apply W-2 phase-in: reduction = $5,350 × 64.33 percent = $3,442. Final QBI deduction = $14,267 − $3,442 = $10,825. If this same attorney had taxable income above the $276,750 phase-in top, the deduction would be zero because SSTBs phase out completely at the top of the range.
Worked Example 3 — Non-SSTB Above Phase-In Range
A NJ contractor running a construction company as a partnership. Each of two equal partners has $400,000 of QBI on their K-1. Each partner's household taxable income is $600,000 (above the $553,500 phase-in top for MFJ). The partnership paid $300,000 of W-2 wages and owns $400,000 of qualified property (UBIA $400,000). Construction is NOT an SSTB.
Each partner's share of W-2 and UBIA: $150,000 wages and $200,000 UBIA.
Tentative deduction: 20 percent of $400,000 = $80,000.
W-2 / UBIA limit: greater of (50 percent of $150,000 = $75,000) or (25 percent of $150,000 + 2.5 percent of $200,000 = $37,500 + $5,000 = $42,500). Limit is $75,000.
Final deduction: $75,000. The limit binds because the W-2 wages multiple ($75K) is less than the tentative ($80K). Each partner deducts $75,000 on their personal return. Federal tax saved at a 35 percent bracket: roughly $26,250 per partner per year.
After You Run the Calculator
The calculator output is a planning starting point, not a return-ready figure. Here is how to use the result:
If you are well below the threshold the deduction is straightforward and the calculator output is essentially what Form 8995 will show. There is no SSTB phase-out and no W-2 limitation to worry about.
If you are in the phase-in range the deduction is partial. SSTB owners can sometimes capture more by lowering taxable income — for example by accelerating retirement plan contributions (SEP-IRA, Solo 401(k), defined benefit) which reduce taxable income directly. Non-SSTB owners can sometimes increase the deduction by paying more W-2 wages from the business.
If you are above the phase-in range as an SSTB the deduction is zero. The only way back into the deduction is to reduce taxable income below the phase-in top through retirement plan contributions, charitable giving, or income deferral. Run the math both ways with a CPA.
If you are above the phase-in range as a non-SSTB the W-2 / UBIA limit binds. To increase the deduction you need to pay more W-2 wages or hold more depreciable qualified property — both have economic costs and should not be done just for a tax deduction.
Whatever the result, document the figures you used. The QBI calculation interacts with retirement plan contributions, the NJ BAIT election (which reduces K-1 income flowing to owners), and the federal S-Corp election (which converts QBI partly into wages). A CPA's job is to coordinate those moves so the QBI deduction is optimized rather than accidentally suppressed.
How to Use This Calculator
Select your filing status. Single (or head of household) uses the $201,750 threshold and $75,000 phase-in window. Married filing jointly uses $403,500 threshold and $150,000 window.
Enter your QBI. Net qualified business income from the pass-through. Schedule C profit, S-Corp ordinary income on K-1, partnership ordinary income on K-1. Excludes capital gains, dividends, interest, and reasonable compensation paid to S-Corp owner-employees.
Enter total taxable income before QBI. Household taxable income computed before the QBI deduction is applied. This determines whether you are below the threshold, in the phase-in range, or above.
Check the SSTB box if applicable. Health, law, accounting, consulting, financial services, performing arts, athletics, brokerage, investment management, trading, securities dealing, or any business where the principal asset is the reputation or skill of an owner or employee. Engineering and architecture are not SSTBs.
Enter W-2 wages and UBIA if you are above the threshold. If you are below the threshold these inputs do not affect the calculation.
Read the results. The calculator shows your tentative deduction, your bracket relative to the phase-in window, and the final deduction after all limitations.
Frequently Asked Questions
What is the Section 199A QBI deduction for tax year 2026?
The Section 199A qualified business income (QBI) deduction lets eligible owners of pass-through businesses deduct up to 20 percent of their qualified business income on their personal federal return. The One Big Beautiful Bill Act made the deduction permanent (the original Tax Cuts and Jobs Act sunset of December 31, 2025 was repealed) and widened the phase-in range from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for joint filers. The 20 percent deduction rate is unchanged. The 2026 threshold amounts under Revenue Procedure 2025-32 are $201,750 for single filers and $403,500 for married filing jointly.
How is the QBI deduction calculated below the 2026 threshold?
Below the threshold the calculation is straightforward. The deduction is the lesser of 20 percent of qualified business income or 20 percent of taxable income (excluding net capital gains). There is no W-2 wage limitation, no UBIA limitation, and no specified service trade or business (SSTB) phase-out. A sole proprietor with $80,000 of QBI and $120,000 of taxable income would deduct 20 percent of $80,000, or $16,000, capped at 20 percent of taxable income of $24,000.
What is a Specified Service Trade or Business (SSTB)?
Per IRC section 199A(d)(2), an SSTB is any trade or business involving the performance of services in the fields of health, law, accounting (including bookkeeping), actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investment management, trading, dealing in securities or partnership interests or commodities, or any trade or business where the principal asset is the reputation or skill of one or more employees or owners. Engineering and architecture were specifically excluded by the TCJA and are not SSTBs. SSTB designation only matters for taxpayers above the income threshold — it triggers a phase-out that reaches zero deduction at the top of the phase-in range.
How does the SSTB phase-out work in 2026?
For SSTB owners with taxable income above the 2026 threshold (single $201,750 / MFJ $403,500), the deduction is reduced proportionally across the OBBBA-expanded phase-in window of $75,000 single / $150,000 MFJ. The applicable percentage equals 100 percent reduced by the ratio of taxable income above the threshold to the phase-in window. A single SSTB owner with $250,000 of taxable income is approximately $48,250 above the threshold, or 64.3 percent through the $75,000 window, so only 35.7 percent of QBI items count. SSTB owners with taxable income at or above the top of the phase-in range ($276,750 single / $553,500 MFJ) get zero QBI deduction.
What is the W-2 wages limitation for non-SSTB owners above the threshold?
Per IRC section 199A(b)(2)(B), a non-SSTB owner above the threshold is limited to the lesser of 20 percent of QBI or the greater of: (1) 50 percent of the W-2 wages paid by the business, or (2) 25 percent of W-2 wages plus 2.5 percent of the unadjusted basis immediately after acquisition (UBIA) of qualified property. Within the phase-in range the limitation is itself phased in. Above the top of the range the limitation applies fully. Sole proprietors with no employees (and therefore no W-2 wages) and minimal qualified property typically lose most or all of the deduction once they cross above the phase-in range.
What does the QBI deduction calculator NOT include?
The calculator gives a directional estimate of the regular Section 199A deduction. It does not model business aggregation under Treasury Regulation section 1.199A-4 (combining multiple qualified businesses), qualified REIT dividends and publicly traded partnership income (which use a separate computation), trust and estate-level QBI calculations, the technical net-capital-gains adjustment in the taxable income cap, or the alternative computation for taxpayers who must file Form 8995-A Schedule A or B. State QBI conformity also varies — New Jersey does not conform to Section 199A so the deduction does not reduce NJ Gross Income Tax. For a precise calculation tailored to your specific situation, schedule a free consultation with ProAxis.
Does New Jersey allow the QBI deduction on my NJ return?
No. New Jersey does not conform to IRC Section 199A for purposes of NJ Gross Income Tax. The QBI deduction reduces only federal taxable income — your NJ tax bill is unchanged by the deduction. The federal benefit is still meaningful for NJ pass-through owners, especially when stacked with the NJ BAIT election and a federal S-Corp election. ProAxis runs the layered analysis as part of every NJ pass-through onboarding.
Related ProAxis Resources
S-Corp Savings Calculator — pair the S-Corp election with the QBI deduction; the W-2 salary you pay yourself counts toward the W-2 wages limitation
NJ BAIT Savings Calculator — federal SALT cap workaround that reduces K-1 income (and therefore QBI); ProAxis runs both calculations together
Section 179 + Bonus Depreciation Calculator — equipment purchases reduce QBI in the year placed in service; the depreciation timing decision interacts with QBI optimization
Tax Planning Service Hub — annual planning that integrates QBI optimization with retirement plan contributions, entity structure, and the BAIT election
Self-Employment Tax Calculator — half-of-SE-tax deduction reduces your taxable income (and therefore the QBI cap) before the §199A computation
1099 vs W-2 Calculator — QBI applies only to 1099/Schedule C income, not W-2 wages — material to the comparison
Bookkeeping Cost Calculator — clean books are required to compute QBI accurately; estimate the monthly bookkeeping fee that supports the §199A computation
Want a Precise QBI Analysis for Your Specific Situation?
Schedule a free consultation with ProAxis Tax & Accounting Services. ProAxis runs the full QBI computation including aggregation, REIT/PTP income, retirement plan optimization, and BAIT/S-Corp interaction — far beyond what a generic calculator captures.
