Below the statutory income thresholds, the QBI deduction is a straightforward lesser-of comparison between two 20% figures.
How it works
The deduction is the smaller of 20% of qualified business income, or 20% of taxable income minus net capital gains. The second cap exists because the deduction can’t exceed a fifth of the ordinary income it’s meant to offset.
What this does not include
Above the statutory income threshold, the deduction becomes limited by W-2 wages paid and the unadjusted basis of business property — a business-specific calculation this general calculator does not attempt. Income earned through a C corporation or as an employee also doesn’t qualify at all, per the IRS source.
How to use this calculator
- Enter your qualified business income and total taxable income before this deduction.
- Enter any net capital gains already included in that taxable income figure, if any.
Frequently asked questions
Who is eligible for the QBI deduction?
Owners of sole proprietorships, partnerships, S corporations, and some trusts and estates — not income earned through a C corporation or as an employee.
Why is there a second cap based on taxable income?
Because the deduction is bounded by ordinary income — without that cap, a business with very low taxable income could claim a deduction larger than its own tax liability allows for.
Does this apply above the income threshold?
Not accurately — above the statutory threshold, wage and property limits apply that this simplified calculator doesn’t model.
