See the QBI deduction you’re quietly losing — and the moves that can win it back.

What this tool does

If you own a profitable service business — consulting, law, medicine, accounting, financial services — there’s a valuable deduction that may be quietly shrinking as your income grows, and most people affected never notice until it’s gone: the Qualified Business Income (QBI) deduction.

Unlike a bill that jumps, this loss is invisible. Nothing changes on your bank statement; the deduction just gets smaller and you pay more tax than you needed to. This tool makes it visible — enter your business income and structure, and it shows how much QBI deduction the phase-out is costing you, and what it would take to win it back. And because the phase-out is measured against your full-year taxable income, it tracks where you land as the year develops — so the move happens before December 31, when the window to act closes for the year.

How the QBI phase-out works

The QBI deduction (Section 199A) lets many pass-through business owners deduct up to 20% of their qualified business income — potentially a $40,000 deduction on $200,000 of income. As of 2025 it was made permanent.

For most owners under the income thresholds, it's simple: you get the full 20%. Above the thresholds, it gets complicated — and for one category of business, it can disappear entirely.

The tax code singles out a Specified Service Trade or Business (SSTB) — businesses where the principal asset is the skill or reputation of the people involved: health, law, accounting, consulting, financial services, performing arts, athletics, and investing. For an SSTB, the QBI deduction begins phasing out once taxable income crosses a threshold and is fully eliminated above the top of the range. For 2026, the SSTB phase-out begins around $201,750 (single) or $403,500 (married filing jointly) and is gone above roughly $276,750 (single) or $553,500 (married filing jointly) — figures that adjust for inflation annually. Confirm current numbers with the IRS.

Why it's worth a tool

Inside the phase-out range, every extra dollar of taxable income doesn’t just get taxed — it also shrinks your deduction, raising your effective marginal rate above what your bracket suggests. The flip side is the opportunity: every dollar you remove from taxable income there is worth more than a dollar, because it also restores deduction you were losing.

That means a pre-tax contribution in this range does triple duty — it funds your retirement, reduces your tax directly, and recovers lost QBI deduction. This tool computes how much each available deduction restores, given your numbers.

What actually moves your position

The phase-out is measured against your taxable income, so anything that reduces taxable income moves your position — pre-tax retirement contributions (a SEP-IRA, Solo 401(k), or for higher earners a defined-benefit / cash-balance plan), HSA contributions, and, unlike the ACA cliff, itemized deductions such as charitable giving. Mortgage interest and state and local taxes count toward your position too, though they’re usually fixed rather than something you adjust.

There’s a wrinkle that decides which of those is worth the most, and it’s easy to miss: some deductions reduce your qualified business income itself, not just your taxable income — employer retirement contributions, the self-employed health insurance deduction, and business expenses all shrink the base the 20% is calculated on. So they restore less deduction per dollar than a “clean” one that leaves the base untouched, such as an employee deferral, a traditional IRA, or charitable giving. The tool prices each option against your actual numbers rather than assuming they’re interchangeable.

How it works, step by step

1. 1Enter your situation — business income, your reasonable salary (if you run an S-corp), SSTB status, filing status, and other taxable income.
2. 2See what you're losing — how much QBI deduction the phase-out is costing you at your current income.
3. 3See what moves it — the deductions open to you that restore it, and the tax each one saves.
4. 4Adjust and explore — change a deduction and watch your QBI deduction and tax update.
5. 5Track your position through the year — the phase-out is measured against your full-year taxable income, so come back as it changes and see where you land and the moves still available to you, while there's time to act.

The calculation handles how your contribution and your taxable income drive the deduction — reducing taxable income restores the deduction you were losing. That interaction is easy to get wrong by hand: the deduction is computed off your pre-QBI taxable income, so the contribution that recovers the most depends on your full tax picture, not just your business income. And since where you land isn’t settled until year-end, the tool keeps your position current as your income changes — so if a strong year pushes you into the phase-out, you see it in time to act, not at filing.

An important distinction

This sharp phase-out is specific to SSTBs. If your business is not a specified service business — engineering, architecture, manufacturing — different rules apply above the threshold (based on wages paid and property held), and the “disappears entirely” outcome generally doesn’t apply. So the first question is always whether you’re an SSTB.

For SSTBs, the lever is contributions, not salary. If you run an S-corp, you might assume adjusting your salary is the move — but for an SSTB above the threshold, the deduction is gone regardless of the salary/distribution split, so the real lever is reducing taxable income through contributions. (For non-SSTBs, salary can matter, for a different reason. This is exactly the kind of thing that’s easy to get backwards.)

Frequently asked questions