The QBI Deduction Calculator estimates the Section 199A qualified business income deduction for a pass-through business: generally 20% of qualified business income, limited by your taxable income and, at higher incomes, by the W-2 wages and property of the business and by whether the business is a specified service trade or business (SSTB). Enter QBI, taxable income, net capital gains, filing status, and the optional wage and property figures.
How It Works
Two components are computed and the deduction is the lesser of them while you are below the income threshold: 20% of QBI, and 20% of taxable income reduced by net capital gains. Above the threshold, the W-2 wage and UBIA limit phases in: the deduction cannot exceed the greater of 50% of the business's W-2 wages, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property (UBIA). For an SSTB, the deduction phases out entirely across the same band. The calculator reports which phase you are in, the components, the wage limit, and estimated tax savings at your marginal rate.
Thresholds used by the calculator
| Filing status | Phase-in starts | Fully phased | |---|---|---| | Single / head of household / married filing separately | 276,775 | | Married filing jointly | 553,500 |
Parameters
| Input | Required | Meaning | |---|---|---| | QBI | Yes | Qualified business income from the pass-through | | Taxable income | Yes | Total taxable income before the QBI deduction | | Net capital gains | No | Reduces the taxable-income component | | Filing status | No | Selects the threshold band | | Is SSTB | No | Specified service business: phases out above the threshold | | W-2 wages | No | Wages paid by the business, for the wage limit | | UBIA | No | Unadjusted basis in qualified property | | Marginal tax rate | No | For the estimated savings figure; defaults to 24% |
Worked example
Below the threshold: QBI of 120,000, net capital gains of 20,000; the taxable-income component is 20% of (120,000 - 20,000) = 20,000, worth about 60,000 of W-2 wages and no property: the wage limit is the greater of 50% of wages (15,000), so 20,000 tentative deduction; with only 15,000 and the deduction is progressively squeezed toward it across the band. This is why owners near the threshold model wage and entity decisions before year-end, not at filing time.
What counts as QBI, roughly
QBI is the net of qualified income, gains, deductions, and losses from a qualified trade or business inside the United States, excluding investment-type items such as capital gains, dividends, and interest not allocable to the business, and excluding W-2 wages earned as an employee. Specified service businesses (health, law, consulting, financial services, and similar reputation-or-skill fields, with engineering and architecture notably excluded from the definition) lose the deduction entirely once income passes the band. Guaranteed payments to partners are not QBI. The calculator takes your QBI figure as given; computing it is the accounting work upstream.
Limitations
This is an estimator for the core mechanics. It does not aggregate multiple businesses, apply the REIT/PTP component, handle losses carried forward, determine SSTB status, or compute QBI itself from a return. Thresholds and rules are as stored in the calculator for the modeled year; Section 199A has detailed regulations, and material amounts deserve professional review.
The SSTB question deserves its own care
Whether a business is a specified service trade or business decides the deduction's existence at higher incomes, and the definition is field-based: health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, and any business whose principal asset is the reputation or skill of its owners or employees, with engineering and architecture expressly carved out. Businesses selling products alongside services are tested on their revenue mix, and separate-entity structures built to route service income around the definition are addressed by anti-abuse rules. Because the calculator takes your SSTB answer as an input, confirm it against the regulations or with a professional before relying on a modeled deduction near the thresholds.
Record-keeping that makes the number real
The deduction is computed at the individual level from figures each entity must report: QBI, W-2 wages, and UBIA per business, on the schedules attached to the K-1 or return. Keep payroll records that tie W-2 wages to the business (not the owner personally), fixed-asset registers supporting UBIA, and a contemporaneous note of the SSTB analysis. Most QBI disputes are documentation disputes; the arithmetic in this calculator is the easy part, and it is only defensible with the underlying records assembled before filing, not reconstructed after a notice arrives.
Frequently Asked Questions
Why is net capital gains subtracted?
The taxable-income limit is designed so the deduction shelters ordinary-rate income, not income already taxed at preferential capital-gains rates. The statute therefore measures the limit against taxable income excluding net capital gain.
Does the wage limit apply to everyone?
No. Below the threshold band it does not apply at all, which is why the same business can receive the full 20% at one income and a limited amount at a higher income. It phases in across the band and applies fully above it.
Can employees claim the QBI deduction?
No. Wages are not QBI, and converting employee status to contractor status purely for the deduction is an area the SSTB and classification rules specifically police.