QBI Deduction Calculator
Calculate your Section 199A pass-through business deduction
The Qualified Business Income (QBI) deduction allows eligible self-employed individuals and pass-through business owners to deduct up to 20% of their qualified business income. This calculator handles the complex W-2 wage and SSTB limitations.
QBI is the most valuable deduction most freelancers don't realize they qualify for. A clean 20% off your business income — no receipts to track, no extra forms beyond Form 8995. But the SSTB rules (specified service trades and businesses) phase out doctors, lawyers, consultants, and financial advisors above the income thresholds.
Real-world scenario
Freelance designer with $95K Schedule C profit
Single, $95K QBI, below the $197,300 (2025) single threshold. Design isn't an SSTB. Full 20% deduction = $19,000 off taxable income. At a 22% marginal rate: $4,180 saved. Took her 30 seconds on Form 8995. She'd skipped it her first two years freelancing — left $8K on the table.
The part most people miss
Rental real estate can qualify for QBI under the 250-hour safe harbor (Rev. Proc. 2019-38): 250 or more hours of rental services each year for an enterprise under 4 years old, or in any 3 of the last 5 years once it is 4+ years old; separate books; contemporaneous time logs; and the annual election statement. You have to actually log the hours and treat the rentals as a trade or business. Most landlords miss this because TurboTax doesn't surface it for Schedule E income. If you're putting that many hours into your rentals, ask explicitly.
Business Information
2025 (Rev. Proc. 2024-40 §3.27): $197,300 single, HoH, QSS and MFS / $394,600 MFJ thresholds, TCJA $50K/$100K phase-in ranges.
Law, accounting, consulting, financial services, performing arts, athletics, etc.
From 2026, $1,000+ of QBI from a business you materially participate in gets at least a $400 deduction (IRC §199A(i)).
W-2 Wage & Property Limits (For High Income)
Only required if your income exceeds the threshold. Leave at $0 if not applicable.
Net Capital Gain (Overall Cap)
The overall cap is 20% of taxable income minus net capital gain, including qualified dividends. Leave the box checked and enter $0 if you had none.
Your QBI Deduction
Section 199A Deduction
$20,000
20.0% effective rate
Approximation only: the deduction multiplied by the marginal ordinary rate for your entered taxable income. Credits, capital-gain stacking, AMT, NIIT and state tax all change the real result.
Scope: the qualified business income component only. Qualified REIT dividends and publicly traded partnership income (Form 8995-A Part IV) are a separate component and are not included here.
Below the Threshold
Your taxable income is at or below the $197,300 threshold, so the W-2 wage/UBIA and SSTB limits don't apply.
W-2 Wage Limits Explained
50% Limit: $0
25% + 2.5% Property: $0
Applied Limit: $0
Three Worked QBI Examples (2025)
Example 1 — Solo consultant under the threshold
Single, $140,000 QBI, $160,000 taxable income, no employees. Below the $197,300 single threshold, so the SSTB classification doesn't matter and W-2 wage limits don't apply.
QBI deduction: 20% × $140,000 = $28,000
Example 2 — Real estate LLC with cost-segregated property
MFJ, $300,000 QBI from a rental LLC qualifying as a §162 trade/business, $30,000 W-2 wages paid, $1,500,000 unadjusted basis of qualified property. Below the $394,600 MFJ threshold.
QBI deduction: 20% × $300,000 = $60,000 (no wage/property limitation needed below threshold).
Example 3 — SSTB consultant in the phase-out
Single law firm partner, $250,000 QBI, $260,000 taxable income. SSTB threshold $197,300; phase-out range $50,000 (single). Excess = $62,700, which is over the range, so the deduction is fully phased out to $0.
QBI deduction: $0 — SSTBs above the phase-out get nothing, regardless of W-2 wages paid.
Qualified vs Non-Qualified Businesses
| Business Type | QBI Eligible? | SSTB? | Above-threshold treatment |
|---|---|---|---|
| Sole proprietor (Schedule C) | Yes | Depends on activity | W-2 wage limit |
| S-corp pass-through | Yes (K-1 box 1) | Depends on activity | W-2 wage limit |
| Partnership / LLC | Yes | Depends on activity | W-2 wage limit |
| Rental real estate (§162 trade/biz) | Yes | No | UBIA-friendly (2.5% basis) |
| Law / accounting / consulting | Yes (below threshold) | Yes | Phases out to $0 |
| Health / financial services | Yes (below threshold) | Yes | Phases out to $0 |
| C-corporation | No | N/A | Use 21% flat corp rate |
| W-2 employee wages | No | N/A | Not pass-through income |
Educational only — see the IRS §199A overview and consult a CPA for SSTB borderline cases.
Frequently Asked Questions
What is the QBI deduction?
The Qualified Business Income (QBI) deduction under Section 199A allows eligible self-employed individuals and pass-through business owners to deduct up to 20% of their qualified business income from their taxable income.
Who qualifies for the QBI deduction?
Taxpayers with income from sole proprietorships, partnerships, S corporations, trusts, or estates may qualify. However, Specified Service Trades or Businesses (SSTBs) like law, accounting, and consulting face income limitations.
What are the 2025 QBI income thresholds?
For 2025, the QBI deduction begins to phase out at $197,300 for single filers and $394,600 for married filing jointly. Above these thresholds, W-2 wage and property limitations apply.
What is an SSTB for QBI purposes?
Specified Service Trades or Businesses include law, accounting, consulting, financial services, athletics, performing arts, and any business where the principal asset is the reputation or skill of its owners.
How does the W-2 wage limitation work?
For high-income taxpayers, the QBI deduction is limited to the greater of: 50% of W-2 wages paid by the business, OR 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property.
Did OBBB make the QBI deduction permanent?
Yes. The One Big Beautiful Bill (signed July 2025) made the §199A 20% Qualified Business Income deduction permanent — it was previously scheduled to sunset after 2025. Phase-in thresholds continue to be inflation-adjusted annually.
Can rental real estate qualify for the QBI deduction?
Yes, if the rental activity rises to a §162 trade or business. The IRS safe harbor (Rev. Proc. 2019-38) requires 250 or more hours of rental services each year for an enterprise under 4 years old, or in any 3 of the last 5 years once it is 4+ years old; separate books; contemporaneous time logs; and the annual election statement. Triple-net leases are explicitly excluded from the safe harbor.
How is QBI calculated for an S-corp owner?
Start from the §199A statement attached to your Schedule K-1 (Form 1120-S), reported with Box 17 code V — not from Box 1 alone, because the statement carries the QBI, W-2 wage and UBIA amounts per trade or business and reflects entity-level adjustments. The reasonable W-2 salary the corporation pays you is not QBI. Paying a higher salary means more FICA tax and less QBI; paying a lower salary raises QBI but exposes you to reasonable-compensation adjustments.
Does this calculator include REIT dividends or PTP income?
No. This calculator computes the qualified business income component only. The qualified REIT dividend and publicly traded partnership component (Form 8995-A Part IV) is a separate calculation that is added after the QBI component.
Sources & References
Primary references used for this content
QBI Deduction Instructions
View on irs.gov
Business Expenses
View on irs.gov
QBI Deduction Overview
View on irs.gov
✓3 primary sources; links re-checked on a weekly rotation by the source watcher
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.