QBI Deduction

The qualified business income (QBI) deduction under section 199A lets most sole proprietors, partners and S corporation shareholders deduct up to 20% of their net business income. The base is profit after the deductible half of self-employment tax, self-employed health insurance and retirement contributions, and the deduction cannot exceed 20% of taxable income.

For 2026 the deduction is permanent, has a $400 minimum for owners with at least $1,000 of qualified income who work in the business, and phases out over a $75,000 range above $201,750 of taxable income for single filers ($150,000 above $403,500 for joint filers). Above the threshold, employee wages, business property and service-business status all change the result.