QBI Deduction in 2026: The 20% Business Tax Break

Calculate your QBI deduction with our [QBI Deduction Calculator](/calculators/finance/qbi-deduction-calculator).

What Is It?

Section 199A allows owners of pass-through businesses (sole props, partnerships, S-Corps, LLCs) to deduct up to 20% of qualified business income from taxable income.

Example:

Self-employed income: $80,000
QBI deduction: $80,000 x 20% = $16,000
Tax saved at 22% bracket: $3,520/year

2026 Income Limits

| Filing Status | Full Deduction | Phase-Out Range |

|---|---|---|

| Single | Under $197,300 | $197,300-$247,300 |

| Married | Under $394,600 | $394,600-$494,600 |

The SSTB Restriction

Specified Service Businesses (law, healthcare, financial services, consulting, accounting) lose the deduction above the phase-out range. Below the threshold, even service businesses qualify.

Always eligible (not SSTB): engineering, architecture, real estate, retail, manufacturing, tech/software, restaurants.

How to Maximize QBI

Contribute to SEP IRA or Solo 401k: Reduces business income below the phase-out threshold.

Example: $210,000 income, $20,000 SEP IRA = $190,000 income — below the $197,300 single threshold. Full deduction restored.

S-Corp election at high income: Split income between salary (not eligible for QBI) and distributions (eligible). The W-2 wages paid also count toward the W-2 wage limitation at higher income levels.

TCJA Sunset Risk

The QBI deduction was a TCJA provision set to expire December 31, 2025. Congress may have extended it by the time you read this — or it may be gone. Verify current law status as this deduction significantly affects planning.

Related Tools

[Self-Employment Tax Calculator](/calculators/finance/self-employment-tax-calculator) — Full SE tax picture
[SEP IRA Calculator](/calculators/finance/sep-ira-calculator) — Maximize SEP to preserve QBI eligibility

QBI Deduction in 2026: The 20% Business Tax Break Most Self-Employed People Miss