QBI Deduction Calculator
The Qualified Business Income (QBI) deduction, also known as the Section 199A deduction, allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income. This deduction can significantly reduce your taxable income, but it comes with complex rules and limitations based on your taxable income, W-2 wages paid by the business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property.
Use this calculator to estimate your potential QBI deduction. Please note that this is an estimation tool and not tax advice. Consult with a qualified tax professional for personalized guidance.
Estimate Your QBI Deduction
Estimated QBI Deduction:
Understanding the QBI Deduction
What is Qualified Business Income (QBI)?
QBI is the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business. This generally includes income from sole proprietorships, partnerships, S corporations, and certain trusts and estates. It does not include investment income, reasonable compensation paid to an S-corp owner, or guaranteed payments to a partner.
Who is Eligible?
Most self-employed individuals and small business owners operating a qualified trade or business are potentially eligible. The deduction is taken on your personal tax return and can be claimed whether you itemize deductions or take the standard deduction.
Key Limitations and Thresholds (2023 Tax Year)
The QBI deduction is subject to several limitations, primarily based on your taxable income before the QBI deduction. For the 2023 tax year, these thresholds are:
- Single Filers:
- Lower Threshold: $182,100
- Upper Threshold: $232,100
- Married Filing Jointly (MFJ):
- Lower Threshold: $364,200
- Upper Threshold: $464,200
How the Limitations Work:
- Overall Taxable Income Limitation: The QBI deduction cannot exceed 20% of your taxable income (before the QBI deduction and net capital gains).
- W-2 Wage and UBIA Limitation:
- If your taxable income is below the lower threshold, this limitation does not apply.
- If your taxable income is above the upper threshold, your deduction is limited to the lesser of 20% of QBI or the greater of:
- 50% of the W-2 wages paid by the qualified trade or business, OR
- 25% of the W-2 wages paid by the qualified trade or business plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property.
- If your taxable income is between the lower and upper thresholds (phase-in range), the W-2 wage and UBIA limitation is phased in proportionally.
- Specified Service Trade or Business (SSTB) Rules:
- An SSTB is generally a business involving the performance of services in fields such as health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners.
- If your business is an SSTB and your taxable income is below the lower threshold, you are eligible for the full QBI deduction.
- If your business is an SSTB and your taxable income is above the upper threshold, you are generally not eligible for any QBI deduction from that business.
- If your business is an SSTB and your taxable income is between the lower and upper thresholds (phase-in range), the QBI deduction is phased out proportionally.
Examples of QBI Deduction Calculation:
Let's use the 2023 thresholds for a single filer (Lower: $182,100, Upper: $232,100).
Example 1: Taxable Income Below Lower Threshold (Simple Case)
- Qualified Business Income (QBI): $100,000
- Taxable Income (before QBI deduction): $150,000
- W-2 Wages: $0, UBIA: $0
- SSTB: No
- Calculation:
- 20% of QBI = $20,000
- 20% of Taxable Income = $30,000
- QBI Deduction = Lesser of ($20,000, $30,000) = $20,000
Example 2: Taxable Income Above Upper Threshold (Non-SSTB, W-2/UBIA Applies)
- Qualified Business Income (QBI): $500,000
- Taxable Income (before QBI deduction): $600,000
- W-2 Wages: $100,000, UBIA: $200,000
- SSTB: No
- Calculation:
- 20% of QBI = $100,000
- W-2/UBIA Limit: Greater of (50% of $100,000 = $50,000) OR (25% of $100,000 + 2.5% of $200,000 = $25,000 + $5,000 = $30,000) = $50,000
- Deduction before overall TI limit = Lesser of ($100,000, $50,000) = $50,000
- 20% of Taxable Income = $120,000
- QBI Deduction = Lesser of ($50,000, $120,000) = $50,000
Example 3: Taxable Income Above Upper Threshold (SSTB)
- Qualified Business Income (QBI): $500,000
- Taxable Income (before QBI deduction): $600,000
- W-2 Wages: $100,000, UBIA: $200,000
- SSTB: Yes
- Calculation: Since it's an SSTB and taxable income is above the upper threshold, the QBI deduction is $0.
Example 4: Taxable Income in Phase-in Range (Non-SSTB)
- Qualified Business Income (QBI): $200,000
- Taxable Income (before QBI deduction): $200,000
- W-2 Wages: $50,000, UBIA: $0
- SSTB: No
- Calculation:
- 20% of QBI = $40,000
- W-2/UBIA Limit: Greater of (50% of $50,000 = $25,000) OR (25% of $50,000 + 2.5% of $0 = $12,500) = $25,000
- Overall TI Limit: 20% of $200,000 = $40,000
- Phase-in Percentage: ($200,000 – $182,100) / ($232,100 – $182,100) = $17,900 / $50,000 = 0.358
- Tentative Deduction (before phase-in): Lesser of ($40,000, $25,000) = $25,000
- Excess Amount (20% QBI – Tentative Deduction) = $40,000 – $25,000 = $15,000
- Reduction Amount = $15,000 * 0.358 = $5,370
- Phased-in Deduction = $40,000 – $5,370 = $34,630
- QBI Deduction = Lesser of ($34,630, $40,000) = $34,630
Example 5: Taxable Income in Phase-in Range (SSTB)
- Qualified Business Income (QBI): $200,000
- Taxable Income (before QBI deduction): $200,000
- W-2 Wages: $50,000, UBIA: $0
- SSTB: Yes
- Calculation:
- Overall TI Limit: 20% of $200,000 = $40,000
- Phase-in Percentage: ($200,000 – $182,100) / ($232,100 – $182,100) = $17,900 / $50,000 = 0.358
- Inclusion Factor (1 – Phase-in Percentage) = 1 – 0.358 = 0.642
- Effective QBI = $200,000 * 0.642 = $128,400
- Effective W-2 Wages = $50,000 * 0.642 = $32,100
- Effective UBIA = $0 * 0.642 = $0
- Deduction before overall TI limit = Lesser of (20% of $128,400 = $25,680) OR (Greater of (50% of $32,100 = $16,050) OR (25% of $32,100 + 2.5% of $0 = $8,025)) = Lesser of ($25,680, $16,050) = $16,050
- QBI Deduction = Lesser of ($16,050, $40,000) = $16,050
Disclaimer: This QBI Deduction Calculator is for informational and educational purposes only. It provides an estimate based on the inputs provided and the current understanding of Section 199A rules for the 2023 tax year. Tax laws are complex and subject to change. This calculator does not constitute tax advice. You should consult with a qualified tax professional to determine your specific eligibility and the exact amount of your QBI deduction.
function calculateQBIDeduction() {
var qbi = parseFloat(document.getElementById('qualifiedBusinessIncome').value);
var taxableIncome = parseFloat(document.getElementById('taxableIncome').value);
var w2Wages = parseFloat(document.getElementById('w2Wages').value);
var ubiaProperty = parseFloat(document.getElementById('ubiaProperty').value);
var isSSTB = document.getElementById('isSSTB').checked;
var filingStatus = document.querySelector('input[name="filingStatus"]:checked').value;
var errorMessageDiv = document.getElementById('errorMessage');
var resultDiv = document.getElementById('result');
var deductionAmountSpan = document.getElementById('deductionAmount');
errorMessageDiv.style.display = 'none';
resultDiv.style.display = 'none';
if (isNaN(qbi) || isNaN(taxableIncome) || isNaN(w2Wages) || isNaN(ubiaProperty) || qbi < 0 || taxableIncome < 0 || w2Wages < 0 || ubiaProperty < 0) {
errorMessageDiv.textContent = 'Please enter valid positive numbers for all income and property fields.';
errorMessageDiv.style.display = 'block';
return;
}
// 2023 Thresholds
var lowerThreshold, upperThreshold;
if (filingStatus === 'single') {
lowerThreshold = 182100;
upperThreshold = 232100;
} else { // mfj
lowerThreshold = 364200;
upperThreshold = 464200;
}
var qbiDeduction = 0;
var overallTILimit = 0.20 * taxableIncome;
if (taxableIncome <= lowerThreshold) {
// Case 1: Taxable Income upperThreshold) {
// Case 2: Taxable Income > Upper Threshold
if (isSSTB) {
qbiDeduction = 0; // No deduction for SSTB above upper threshold
} else {
var qbi20Percent = 0.20 * qbi;
var w2UbiaLimit = Math.max(0.50 * w2Wages, 0.25 * w2Wages + 0.025 * ubiaProperty);
var deductionBeforeTILimit = Math.min(qbi20Percent, w2UbiaLimit);
qbiDeduction = Math.min(deductionBeforeTILimit, overallTILimit);
}
} else {
// Case 3: Taxable Income is BETWEEN Lower and Upper Thresholds (Phase-in Range)
var phasePercentage = (taxableIncome – lowerThreshold) / (upperThreshold – lowerThreshold);
phasePercentage = Math.max(0, Math.min(1, phasePercentage)); // Clamp between 0 and 1
if (isSSTB) {
// For SSTBs, QBI, W-2, and UBIA amounts are effectively reduced
var inclusionFactor = 1 – phasePercentage;
var effectiveQBI = qbi * inclusionFactor;
var effectiveW2 = w2Wages * inclusionFactor;
var effectiveUBIA = ubiaProperty * inclusionFactor;
var deductionBeforeTILimit = Math.min(0.20 * effectiveQBI, Math.max(0.50 * effectiveW2, 0.25 * effectiveW2 + 0.025 * effectiveUBIA));
qbiDeduction = Math.min(deductionBeforeTILimit, overallTILimit);
} else {
// For non-SSTBs, the W-2/UBIA limitation is phased in
var qbi20Percent = 0.20 * qbi;
var w2UbiaLimit = Math.max(0.50 * w2Wages, 0.25 * w2Wages + 0.025 * ubiaProperty);
var tentativeDeduction = Math.min(qbi20Percent, w2UbiaLimit); // What it would be if TI was below lower threshold
var excessAmount = qbi20Percent – tentativeDeduction; // Amount by which 20% QBI exceeds W2/UBIA limit
var reductionAmount = excessAmount * phasePercentage; // Amount of the excess that is disallowed
var phasedInDeduction = qbi20Percent – reductionAmount;
qbiDeduction = Math.min(phasedInDeduction, overallTILimit);
}
}
deductionAmountSpan.textContent = '$' + Math.max(0, qbiDeduction).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultDiv.style.display = 'block';
}