Calculate the Qualified Business Income deduction for pass-through entities and sole proprietors. Handles the full phase-out range, W-2 wage limitation, UBIA cap, and Specified Service Trade or Business (SSTB) rules.
Enter Business & Income Information
Tax Year 2025 · IRC § 199A
Filing Status & Total Income
Filing Status
Taxable Income (before QBI) Line 15 of 1040 before this deduction
$
Business Information
Business Type
Specified Service Trade or Business (SSTB) includes: law, accounting, health, consulting, financial services, brokerage, performing arts, athletics, and any business where the principal asset is the reputation/skill of an owner. SSTBs are fully excluded above the phase-out range.
Net Qualified Business Income (QBI) Net profit from Schedule C, E, or K-1
$
W-2 Wage & Property Limitation
The W-2 wage limitation applies when taxable income is above the threshold. The deduction is limited to the greater of: (a) 50% of W-2 wages, or (b) 25% of W-2 wages + 2.5% of qualified property (UBIA).
W-2 Wages Paid by Business Box 1 of W-2s issued to employees
$
Qualified Property (UBIA) Unadjusted basis of qualified property
$
Net Capital Gains (subtract from taxable income)
$
Section 199A QBI Deduction
—
20% of QBI · Subject to limitations
20% of QBI
—
Before limitations
W-2 Wage Limit
—
50% of wages
Phase-Out %
—
Of deduction remaining
Tax Savings
—
Estimated income tax saved
Net QBI—
20% of QBI (before limits)—
W-2 Wage Limit (50% of wages)—
Alt Wage Limit (25% wages + 2.5% UBIA)—
Applicable Wage Limit—
Phase-Out Reduction—
Overall Taxable Income Limit (20%)—
Final QBI Deduction (lesser of above)—
Phase-Out Range Position
$0Your income$100k
How the QBI Deduction Works
The Basic Rule
Eligible taxpayers may deduct up to 20% of qualified business income from pass-through entities (sole props, S-Corps, partnerships, LLCs). This deduction reduces taxable income but not AGI and is not available to C-Corps.
Phase-Out Thresholds (2025)
Below the threshold ($197,300 Single / $394,600 MFJ): full 20% deduction with no W-2 wage limitation. Above the threshold + $100k (single) / $200k (MFJ): W-2 wage limitation fully applies and SSTB businesses receive zero deduction.
W-2 Wage Limitation
Once income exceeds the threshold, the deduction is capped at the greater of: (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages + 2.5% of the unadjusted basis of qualified property (UBIA). A sole proprietor with no employees and no property gets zero deduction above the phase-out range unless they convert to S-Corp or bring on employees.
SSTB Exclusion
Specified Service Trades or Businesses (law, accounting, health, consulting, financial services, etc.) are fully excluded above the complete phase-out range and receive only a partial deduction in the phase-in range. Non-SSTBs face only the W-2 wage limitation above the threshold.
📊 2025 QBI Thresholds
Threshold (Single)$197,300
Threshold (MFJ)$394,600
Phase-Out Range (Single)$197,301–$247,300
Phase-Out Range (MFJ)$394,601–$494,600
Below Threshold: SSTBFull 20% deduction
Above Phase-Out: SSTBZero deduction
Above Phase-Out: Non-SSTBW-2 wage limited
Overall Limit20% of taxable income
💡 Maximize Your QBI Deduction
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Hire employees: W-2 wages paid to employees increase your wage limitation base — helping high-income non-SSTB businesses.
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Invest in equipment: UBIA (unadjusted basis) of qualified property increases the alternative wage limit calculation.
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Consider S-Corp: Owner salaries count as W-2 wages for QBI limitation purposes — potentially increasing the deduction ceiling.
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Aggregation election: Multiple related businesses can be aggregated to share W-2 wages across the group (Reg. § 1.199A-4).
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Reduce taxable income below threshold via retirement contributions or loss harvesting to eliminate wage limitations entirely.