If you run a sole proprietorship, partnership, S-corp, or other pass-through business, Section 199A of the tax code may let you deduct up to 20% of your qualified business income before you ever get to income tax brackets. This calculator estimates that Qualified Business Income (QBI) deduction for 2026, applies the taxable-income cap the law layers on top of the 20%-of-QBI figure, and gives you a simplified version of the extra limitation that applies to specified service businesses.
How it works
The deduction is the lesser of two numbers: 20% of your qualified business income, or 20% of your taxable income before the QBI deduction, excluding net capital gains and qualified dividends (those already get preferential rates elsewhere, so the law keeps them out of this particular cap). Whichever of those two 20% figures is smaller is your deduction -- capping it this way stops the deduction from exceeding what your overall income can support, which matters most when taxable income is low relative to QBI.
On top of that, specified service trades or businesses (SSTBs) -- law, accounting, health, consulting, financial services, performing arts, and similar fields -- lose the deduction entirely once taxable income clears a threshold: $201,750 for single filers and heads of household, $403,500 for married filing jointly, for 2026. In reality the law phases the SSTB deduction out gradually over a further income range above that threshold rather than cutting it off all at once. This calculator does not model that gradual range -- it treats the threshold as a hard cliff, full deduction below it and zero above it for an SSTB. That is a deliberate simplification, and it is more conservative than assuming the full deduction survives partway into the real phase-out range.
Worked example
Say you have $100,000 of qualified business income and $150,000 of taxable income before the QBI deduction, no capital gains in the mix, you're not an SSTB, and your marginal federal rate is 24%.
- Taxable-income limit: 20% × $150,000 = $30,000
- QBI limit: 20% × $100,000 = $20,000
- QBI deduction: the lesser of the two = $20,000
- Estimated tax savings: $20,000 × 24% = $4,800
Here the QBI-based cap binds, since your business income is lower relative to overall taxable income. Flip that around -- more taxable income relative to QBI, or capital gains pulling the base down -- and the taxable-income limit can bind instead, producing a smaller deduction than 20% of QBI alone would suggest.
How to interpret your result
The QBI deduction is the headline number: it's what actually reduces your taxable income on your return, subject to whichever cap bound in your case. The estimated tax savings figure translates that into real dollars using the marginal rate you supplied -- it's a straight-line estimate, not a bracket-by-bracket calculation, so treat it as directional rather than exact if your income straddles a bracket boundary.
If you flagged your business as an SSTB and your taxable income is above the threshold for your filing status, the calculator reports a $0 deduction. That's the honest, simplified answer under this tool's model -- but the real IRS math phases the deduction down gradually rather than dropping it off a cliff, so if your income sits just above the threshold, a fuller calculation (or a tax professional) may find you're still entitled to a partial deduction that this tool doesn't capture.
This tool also doesn't apply the separate wage/UBIA-of-qualified-property limitation that can cap non-SSTB deductions above the same thresholds, doesn't know your actual tax brackets, and isn't a substitute for a real return or professional advice. It's US federal only -- no state tax treatment is modeled.
Methodology & sources
incomeLimit = 20% × (taxableIncomeBeforeQBI − netCapitalGains); qbiLimit = 20% × qualifiedBusinessIncome; qbiDeduction = max(0, min(qbiLimit, incomeLimit)), further zeroed out if you flagged SSTB and taxable income exceeds your filing status's threshold; taxSavingsEstimate = qbiDeduction × marginalRatePercent ÷ 100. Every output is rounded to the cent from the unrounded intermediate figures.
The 2026 SSTB thresholds ($201,750 single / $403,500 married filing jointly) come from the IRS's Revenue Procedure 2025-32 annual inflation adjustments, reflecting the wider phase-in range the One Big Beautiful Bill Act (OBBBA) set starting in 2026. For the underlying Section 199A mechanics -- including the wage/UBIA limitation this tool skips -- see the IRS's Instructions for Form 8995-A. This calculator covers US federal QBI only; it is not tax advice.