QBI Deduction 2026 (Section 199A): Thresholds, Limits and UBIA
The qualified business income (QBI) deduction lets owners of sole proprietorships, partnerships, S corporations and LLCs deduct up to 20% of their business income (IRC §199A). For 2026 the limits start above taxable income of $201,750 (single) or $403,500 (married filing jointly) and fully apply at $276,750 / $553,500 (Rev. Proc. 2025-32). Above them, the deduction is capped by the business’s W-2 wages and UBIA of its property; new for 2026, it is at least $400 for anyone with $1,000 of active QBI.
2026 thresholds and phase-in ranges
| Filing status | Threshold | Limits fully apply at | Form |
|---|---|---|---|
| Married filing jointly | $403,500 | $553,500 | 8995 at or below the threshold; 8995-A above it (IRS) |
| Married filing separately | $201,775 | $276,775 | |
| Single, head of household, others | $201,750 | $276,750 |
- At or below the threshold: 20% of QBI, capped at 20% of taxable income less net capital gain. No wage, UBIA or service-business limit.
- Inside the range: the wage/UBIA limit and the specified-service exclusion phase in proportionally.
- Above the range: each business’s deduction is the lesser of 20% of its QBI or the greater of 50% of its W-2 wages, or 25% of W-2 wages plus 2.5% of UBIA; a specified service business gets none (IRC §199A(b)(2), (d)).
- Minimum (new for 2026): $400 if QBI from active businesses is at least $1,000 (Rev. Proc. 2025-32 sec. 2.12).
The deduction at five incomes, computed
| Business | QBI deduction |
|---|---|
| $100,000 profit, below the threshold | $15,367 |
| $250,000 profit, consulting (specified service), inside the phase-in range | $27,782 |
| $400,000 profit, no employees, no property (above the range: only the $400 minimum) | $400 |
| $400,000 profit, $500,000 of UBIA, no employees (2.5% of UBIA) | $12,500 |
| $400,000 profit, $100,000 of W-2 wages paid (50% of wages) | $50,000 |
The $100,000 sole proprietor first pays $14,130 of self-employment tax; QBI is the profit less half of it. The deduction is the smaller of 20% of that QBI and 20% of taxable income before the deduction, and here the taxable-income cap binds, because the standard deduction comes off first. Taxable income ends at $61,468 and the year’s federal tax, SE tax included, at $22,367.
An estimate from QuantCalc’s open tax engine (federal 2.6.0, state 1.26.0) for the 2026 tax year. Not tax advice: your return depends on facts this page does not ask about, so check a move with your tax preparer or custodian before acting. How the engine computes each line, with its official source: federal, state.
UBIA meaning: unadjusted basis immediately after acquisition
UBIA is the basis of the business’s qualified property right after it was acquired — generally its cost — without subtracting depreciation taken since. Qualified property is tangible property subject to depreciation that the business holds and can use at the end of the year, used at some point during the year to produce QBI, and still within its depreciable period: the later of 10 years from when it was placed in service or the end of its full recovery period (IRC §199A(b)(6)). Land (not depreciable) and intangibles do not count; a fully depreciated machine still counts for 10 years.
UBIA only matters above the threshold, where 2.5% of it, added to 25% of W-2 wages, is one of the two caps — which is why a property-heavy business with few employees (rental real estate run as a trade or business, for example) can keep a deduction that a no-property, no-payroll business loses.
Self-employed retirement saving (a solo 401(k), a SEP) also lowers QBI. QuantCalc runs savings, withdrawals and taxes year by year, free.
Run the free tax-aware simulation →Common questions
- What is the QBI deduction?
- A deduction of up to 20% of qualified business income from a sole proprietorship, partnership, S corporation or LLC, taken on Form 8995 or 8995-A whether you itemize or not (IRS; IRC §199A). It is limited to 20% of taxable income before it, less net capital gain. A sole proprietor with $100,000 of profit gets $15,367 in 2026.
- What are the 2026 QBI income thresholds?
- Taxable income before the deduction of $201,750 (single, head of household), $201,775 (married filing separately) or $403,500 (married filing jointly). Above them the wage/UBIA limit and the specified-service rule phase in over the next $75,000 ($150,000 joint), fully applying from $276,750 / $276,775 / $553,500 (Rev. Proc. 2025-32).
- What does UBIA mean?
- Unadjusted basis immediately after acquisition: the cost basis of the business’s qualified property when placed in service, before any depreciation. Qualified property is depreciable tangible property held at year end, used in the business during the year, and still within its depreciable period (the later of 10 years or its recovery period) (IRC §199A(b)(6)). Above the threshold, 2.5% of UBIA (plus 25% of W-2 wages) can support the deduction.
- Is there a minimum QBI deduction in 2026?
- Yes, new for 2026: at least $400 if you have at least $1,000 of qualified business income from active businesses you materially participate in, both amounts indexed from 2027 (Rev. Proc. 2025-32 sec. 2.12). In the example, a $400,000 business with no W-2 wages or property still gets $400.
- Can doctors, lawyers and consultants take the QBI deduction?
- Below the threshold, yes, like any business. Above it, a specified service trade or business (health, law, accounting, consulting, financial services, athletics, performing arts and others) loses the deduction gradually over the phase-in range and fully above it (IRC §199A(d)). A single consultant with $250,000 of profit, inside the range, keeps $27,782.