2026 tax year · US · Updated June 11, 2026

QBI Deduction Calculator

The Section 199A qualified business income deduction knocks up to 20% off the freelance profit you pay income tax on, no itemizing required. This calculator shows your 2026 deduction, the cap that usually trims it, and the exact federal tax it saves.

Your numbers

$
Revenue minus deductible business expenses (your Schedule C bottom line).
$
W-2 wages raise your taxable income, which raises the cap on the deduction. 0 if none.
$
Counted in taxable income but excluded from the income base the cap is computed on.

Your 2026 QBI deduction

Qualified business income (QBI)Net profit minus the deductible half of SE tax
$74,348
Tentative deduction (20% of QBI)
$14,870
Taxable-income cap20% of taxable income minus capital gains. This cap is what limits your deduction.
$11,650
Your QBI deduction
$11,650
Federal tax savedComputed with vs without the deduction at 2026 brackets
$2,183
Self-employed health insurance and self-employed retirement contributions also reduce QBI and are not modeled here. The deduction lowers income tax only, never self-employment tax. You do not need to itemize: it stacks on top of the standard deduction.

How the deduction is calculated

Section 199A gives pass-through owners, which includes sole proprietors, partnerships, S corporations, and most LLCs, a deduction worth up to 20% of qualified business income. For a freelancer, QBI is your net Schedule C profit minus the deductible half of self-employment tax. The catch is the second limb: your deduction is the lesser of 20% of QBI or 20% of your taxable income minus net capital gains.

That cap binds more often than people expect. Take a single filer with $80,000 of profit and no other income: 20% of QBI works out to a tentative $14,870, but taxable income (after half of SE tax and the standard deduction) is lower than profit, so the cap pulls the deduction down to $11,650. The deduction reduces income tax only. It never touches self-employment tax, so your quarterly SE tax stays the same while the income tax portion of your quarterly estimated payments shrinks.

One caveat: this calculator models the below-threshold case. Once taxable income passes the 2026 thresholds of $201,750 (single) or $403,500 (married filing jointly), W-2 wage and property limits phase in and specified service businesses lose the deduction entirely. If the calculator shows the amber warning, take the number to a CPA instead. For the full picture, including what counts as a specified service business and how the new $400 minimum works, read our QBI deduction guide for side hustlers.

These are estimates, not tax advice. The model excludes self-employed health insurance and retirement deductions (both reduce QBI), the above-threshold W-2/property limits, and the SSTB phase-out.

Where these numbers come from

The deduction is computed as the lesser of 20% of QBI or 20% of taxable income minus net capital gains, with the OBBBA minimum applied. Every figure is transcribed from these sources:

Constants last verified against these sources on June 11, 2026. Every value is also pinned by an automated test suite that fails if a rate in the calculator drifts from the figure we transcribed from the source.

Frequently asked questions

What counts as qualified business income (QBI)?
Net income from a US trade or business you operate as a sole proprietor, partnership, S corporation, or LLC, which covers most freelance and side hustle profit reported on Schedule C. It excludes W-2 wages, capital gains, dividends, and interest. For the self-employed, QBI is also reduced by the deductible half of self-employment tax, plus any self-employed health insurance and retirement deductions.
Why is my deduction less than 20% of my profit?
The deduction is the lesser of 20% of your QBI or 20% of your taxable income minus net capital gains. If self-employment is your only income, your taxable income is lower than your profit (the standard deduction and half of SE tax come off first), so the taxable-income cap usually binds and the deduction lands below 20% of profit.
What are the 2026 income thresholds and what happens above them?
For 2026, the W-2 wage and qualified-property limits start phasing in once taxable income exceeds $201,750 for single and head of household filers ($201,775 if married filing separately) or $403,500 for married filing jointly, with the phase-in complete at $276,750 and $553,500 respectively. Above the threshold, the deduction can be limited by the W-2 wages your business pays and its depreciable property, and specified service businesses (consulting, health, law, accounting, financial services) see the deduction phase out entirely. This calculator handles the below-threshold case only.
What is the new $400 minimum deduction?
Starting in 2026, OBBBA guarantees a minimum QBI deduction of $400 if you have at least $1,000 of qualified business income from businesses in which you materially participate. Both numbers are indexed for inflation in later years. It mainly helps very small side hustles whose 20% calculation would otherwise come out below $400.
Does the QBI deduction reduce self-employment tax?
No. Self-employment tax (15.3% Social Security and Medicare) is computed on your net profit before the QBI deduction is applied. The deduction only reduces the income tax side of your bill, which is why your quarterly SE tax estimate does not change when you claim it.
Do I need to itemize to claim it?
No. The QBI deduction is taken in addition to either the standard deduction or itemized deductions. You claim it on Form 8995 (or Form 8995-A above the thresholds) and it flows to Form 1040 as its own line.
Is the QBI deduction permanent now?
Yes. Section 199A was originally scheduled to expire after 2025, but the One Big Beautiful Bill Act (OBBBA) made it permanent, added the $400 minimum deduction, and widened the phase-in ranges starting in 2026.
Does my W-2 day job affect the deduction on my side hustle?
Wages themselves are not QBI, but they raise your taxable income, which cuts both ways. More taxable income lifts the 20%-of-taxable-income cap, so a day job can let you keep the full 20% of your side hustle QBI. But it can also push your taxable income over the $201,750 threshold (2026, single), where the W-2 wage and SSTB limits start to apply.

Other free calculators