A tool to calculate the deduction for qualified business income according to Section 199A.

Starting in the year 2026, there were some changes made to the Section 199A deduction. These changes were implemented by Congress in order to adjust for inflation and improve the way future inflation adjustments are made. In addition, a small "minimum" QBI deduction was also added.

However, the formula for calculating this deduction remains quite complex. So, if you're trying to estimate the value of this significant business deduction, you'll likely find the calculator provided below to be quite useful. To use the Section 199A calculator, all you need to do is enter your own numbers in place of the example data given and then click on the Calculate button.

Further instructions and information will be provided below the calculator for your convenience. There are a few inputs that you will need to provide, with the most crucial ones being your taxable income before taking into account any Section 199A "qualified business income" adjustment, as well as the actual qualified business income that you have generated from your business or real estate investments. In most cases, the deduction is equal to the lower of either 20% of your taxable income or 20% of your qualified business income.

However, it's important to note that for taxpayers with higher incomes, their Section 199A deduction may be limited or eliminated altogether. For instance, in the year 2026, if a single taxpayer has a taxable income that exceeds $276,750, or if a married taxpayer has a taxable income that exceeds $553,500, their deduction will be limited to either 50% of their wages or 25% of their wages plus 2.5% of their depreciable property. For those who have specified service trades or businesses, the deduction will be completely taken away once their taxable income before the deduction crosses these thresholds.

Therefore, it is necessary for you to provide information regarding the W-2 wages that were paid and the unadjusted basis of any depreciable property that was acquired for use in your business. You will also need to indicate whether your business falls under the category of a specified service trade or business, as well as whether you are filing your taxes as a married taxpayer or not. For single taxpayers whose income falls between $201,750 and $276,750, and for married taxpayers whose income falls between $403,500 and $553,500, there is a phase-in range where they may lose a percentage of their Section 199A deduction.

For example, if a taxpayer falls X% within this band, then the formula will only apply X% of any wage or depreciable property limitation, and will also eliminate X% of the deduction due to being a specified service trade or business. To wrap things up, here are three important notes to keep in mind. Firstly, the formula used in the Section 199A calculator currently takes into account the 2026 phase-in ranges.

Secondly, if a business has at least $1,000 of qualified business income, the owner will still receive a $400 QBI deduction. And thirdly, for head of household taxpayers, the calculation for the 199A deduction is the same as that for single taxpayers, so they can use this estimate and get an accurate result. However, for married taxpayers who are filing separately, there is a slightly different phase-in which will result in a slightly different estimate.

You can still use the estimate for single taxpayers, but there may be a slight difference of a few dollars. Note: For more information about Section 199A, please check out our blog where we provide extensive background information on this topic.