The 20% Qualified Business Income deduction — your amount, with the income limits applied
| Test | Amount |
|---|
The QBI deduction (Section 199A) is the biggest tax gift self-employed people routinely underuse: 20% of qualified business income deducted straight off taxable income — no receipts, no spending required, just for operating a pass-through business (sole proprietorship, LLC, S-corp, partnership). A freelancer with $80,000 of profit deducts $16,000 and saves roughly $3,500. This calculator computes yours with the two rules that complicate it: the income thresholds (with the SSTB trap) and the lesser-of limit almost everyone forgets.
That second limb — the taxable-income limit — is the one that bites: a freelancer with big deductions elsewhere (huge 401(k) contributions, itemized deductions) can have taxable income below their business profit, which caps the QBI deduction at the smaller base. The calculator's table shows both limbs and which one binds you.
| Taxable income | Regular business | SSTB (specified service) |
|---|---|---|
| Below $197,300 / $394,600 (MFJ) | Full 20% | Full 20% |
| In the phase range (+$50k/$100k) | W-2/property tests phase in | Deduction phases OUT |
| Above the range | Limited to 50% of W-2 wages (or 25% + 2.5% of property) | $0 |
SSTBs — health, law, accounting, consulting, financial services, athletics, performing arts, "reputation/skill" businesses — lose the deduction entirely above the threshold. Below it, SSTB status is irrelevant; the classification only matters for high earners, where it matters enormously (and drives real planning: income smoothing, retirement contributions to duck under the line, entity restructuring).
In: net profit from Schedule C businesses, rental real estate rising to a "trade or business" (most active landlords qualify, especially under the 250-hour safe harbor), K-1 pass-through income. Out: W-2 wages (including your own S-corp salary), capital gains, interest/dividends, and guaranteed partnership payments.
No — a plain sole proprietorship filing Schedule C qualifies fully. Entity choice affects other things (liability, SE tax via S-corp salary splits); QBI treats all pass-throughs alike below the thresholds.
Specified Service Trades or Businesses: health, law, accounting, actuarial, performing arts, consulting, athletics, financial/brokerage services, and any business trading on the owner's reputation or skill. Engineering and architecture are explicitly excluded (they qualify as regular businesses).
If the rental activity rises to a trade or business — regular, continuous involvement — yes, and the IRS's 250-hour safe harbor makes qualification concrete for active landlords. Triple-net leases and casual single-property landlords are shakier.
The taxable-income limit: the deduction can't exceed 20% of (taxable income minus capital gains). Big deductions elsewhere shrink the cap — the calculator's table shows exactly which limb binds.
No — it's an income-tax deduction only. SE tax still applies to full net profit (see the SE Tax Calculator). Together, though, QBI knocks the effective federal rate on freelance profit down substantially.
It was made permanent by 2025 legislation (it had been scheduled to expire). Thresholds index annually; this tool uses 2025 figures.
Yes — every figure computes locally in your browser.
QBI is a fifth of your profit deducted for free — the only requirements are knowing it exists and steering around the thresholds. Compute it here, then let the retirement-contribution interplay in the note guide the bigger planning conversation.