QBI deduction (Section 199A) calculator

Section 199A — 20% off the top for pass-through businesses

The QBI deduction (Section 199A) is the best post-TCJA goodie for self-employed and pass-through owners. Up to 20% of qualified business income deducted before computing federal tax. Free money if you qualify.

The decision tree

1. Compute QBI (net SE income, K-1 ordinary income, etc.)
2. Compute total taxable income (TTI)
3. If TTI ≤ $191,950 single ($383,900 MFJ): full 20% deduction, no SSTB issue
4. If TTI > threshold:
   - If SSTB: phases out to $0 between $191k-$241k single
   - If non-SSTB: limited to lesser of 20% × QBI or 50% × W-2 wages

What's a Specified Service Trade or Business (SSTB)?

The list (Section 199A(d)(2)(A)):

• Consulting
• Law
• Health (doctors, dentists, etc.)
• Performing arts
• Finance / investment management
• Brokerage services
• Athletics
• Trade or business where reputation/skill of one person is principal asset

NOT SSTBs (eligible above threshold): engineering, architecture, manufacturing, retail, real estate (rentals are tricky).

Strategies to preserve QBI above threshold

• Pay yourself W-2 wages (S-corp): wages reduce QBI but enable W-2 wage limit calculations
• Stay below threshold: max retirement contributions, defer income — keep TTI under $191k/$383k
• Structure work as non-SSTB: physician owning an MRI center (real estate component) — partial non-SSTB carve-out
• Spousal income split: if MFJ over threshold, sometimes MFS to preserve QBI on lower-earning spouse's business