QBI Deduction Calculator: 20 Percent Pass-Through 2026

What the QBI deduction is

The qualified business income (QBI) deduction — also called the Section 199A deduction — lets eligible self-employed filers and small-business owners deduct up to 20% of qualified business income from a pass-through business. It is claimed in addition to your ordinary Schedule C expenses, so it reduces taxable income even after rent, software, and mileage are already written off. The One Big Beautiful Bill Act made Section 199A permanent in July 2025, ending the old sunset date — the deduction is no longer scheduled to disappear. See the IRS One Big Beautiful Bill Act tax deductions announcement for the official summary.

How the 20% formula works

Below the phase-out threshold the arithmetic is simple: deduction = 20% × QBI, further capped at 20% of your taxable income minus net capital gain. Enter your Schedule C profit after the adjustments that count against it — the self-employment tax deduction, self-employed health insurance premiums, and retirement plan contributions — plus any other pass-through QBI. The default numbers on this page show the most common freelancer case: $120,000 of QBI and $160,000 of taxable income, single, which produces a $24,000 deduction (estimate; confirm current IRS thresholds).

2026 phase-out thresholds

Full deduction applies when taxable income is below $201,750 single / $403,500 married filing jointly. The deduction phases out completely at $276,750 single / $553,500 MFJ — a widened phase-in range of $75,000 single / $150,000 MFJ. Inside that range the deduction is reduced by 50 cents for every dollar of taxable income over the threshold (simplified estimate). Above the phase-out end, the base 20% deduction is gone for a non-SSTB business unless wage and property limitations rebuild part of it; this calculator reports zero as a conservative simplified estimate. The IRS posts current-year figures on its QBI deduction topic page.

2026 thresholds at a glance

The phase-in range is $75,000 single ($276,750 − $201,750) and $150,000 joint ($553,500 − $403,500) — widened from prior years, which is why older articles quoting narrower bands no longer apply.

Three freelancer calculations

Below the threshold the arithmetic is one multiplication plus a cap check — the deduction is the lower of 20% of QBI and 20% of taxable income minus net capital gain:

What counts as QBI — and what does not

Included: Schedule C (or partnership/S-corp) profit minus the adjustments listed above. Excluded: W-2 wages you pay yourself as an employee, guaranteed payments to partners, long-term capital gains, dividends, interest income, and wages earned as a worker — freelancers with Schedule C profit qualify, pure W-2 employees do not. Beginning in 2026 there is also a $400 minimum deduction when you have at least $1,000 of QBI from an active business, so tiny side hustles are no longer rounded to zero.

Losses, REIT dividends, and multiple businesses

A year with a qualified business loss produces no deduction for that business — the loss carries forward and shrinks next year's QBI before the 20% rate applies. Example: a $12,000 carryforward against $80,000 of QBI leaves $68,000, so 20% × $68,000 = $13,600. Qualified REIT dividends and publicly traded partnership income get their own separate 20% calculation outside the business QBI. With more than one pass-through, figure each business separately; the IRS allows aggregation when the businesses share control and related offerings, elected once and applied consistently.

Specified Service Trades and Businesses (SSTB)

If your business is a specified service trade or business — health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, or investing — the phase-out is stricter: above the threshold the SSTB deduction falls to zero rather than being limited by the wage tests. Many freelancers in consulting or accounting fall into this category. Below the threshold, SSTB and non-SSTB are treated the same, which is why lower-income consultants still get the full 20%.

Form 8995 vs 8995-A: step walkthrough

1. Compare taxable income to the threshold: full deduction below $201,750 single / $403,500 married filing jointly; phase-out through $276,750 single / $553,500 MFJ.
2. Below the threshold: file Form 8995 — the simplified worksheet. Deduction is 20% of QBI, capped at 20% of taxable income minus net capital gain.
3. Above the threshold, or in a specified service business in phase-out, or claiming wage/property limits: file Form 8995-A with its schedules for the phase-in, SSTB, and wage/property calculations.
4. Attach and carry the result to the return as the Section 199A deduction, keeping the QBI profit records behind it.

Go deeper

Run the estimate, then read the QBI deduction guide for worked examples above and below the threshold, the W-2 wage and property limitations, and which form (8995 vs 8995-A) you file. Pair it with the tax set-aside calculator, the hourly rate calculator, and the contract rate converter to see how the deduction feeds your pricing and quarterly estimates.

The QBI threshold math on this page was worked by hand under 2026 IRS limits, separately from the calculator code. How we check every page.