Qualified Business Income Deduction Calculator
Cut your tax bill by up to 20% with the QBI deduction. Calculate your savings in minutes.
How the Qualified Business Income Deduction Calculator works
Enter your business income, filing status, and business type. Get your exact QBI deduction amount and tax savings instantly.
The QBI deduction can save you thousands in taxes, but the rules are complex. This calculator handles the math so you can maximize your savings.
How it works
Tutorial
The Qualified Business Income (QBI) deduction lets business owners deduct up to 20% of their business income, which can save thousands in taxes each year. The challenge is that the IRS rules are complex, with income limits and wage requirements that can reduce your deduction.
Use the calculator above for instant results, or follow this guide to calculate your deduction step-by-step.
The Formula
| Component | Formula |
|---|---|
| Base QBI Deduction | Business Income × 20% |
| W-2 Wage Limit | Greater of: (50% of W-2 wages) OR (25% of W-2 wages + 2.5% of property) |
| Income Limit | 20% of (Taxable Income – Capital Gains) |
| Final Deduction | Smallest of: Base Deduction, Wage Limit (if applicable), Income Limit |
Step-by-Step Example
Let’s calculate the QBI deduction for a small business owner.
Step 1: Find Your Qualified Business Income
Start with your business profit:
| Income Item | Amount |
|---|---|
| Business Net Profit | $185,000 |
| Less: Self-Employment Tax (half) | -$13,065 |
| Less: Health Insurance | -$8,400 |
| Less: Retirement Contribution | -$18,500 |
| Qualified Business Income | $145,035 |
Calculation:$185,000 – $13,065 – $8,400 – $18,500 =$145,035
Step 2: Calculate 20% Deduction
| Component | Value |
|---|---|
| Qualified Business Income | $145,035 |
| Deduction Rate | × 20% |
| Base Deduction | $29,007 |
Calculation:$145,035 × 0.20 =$29,007
Step 3: Check Income Limits
See if wage limits apply:
| Filing Status | 2024 Threshold | Phase-Out Range |
|---|---|---|
| Single | $191,950 | $191,950 – $241,950 |
| Married Joint | $383,900 | $383,900 – $483,900 |
| Your Income (Joint) | $220,000 | Below threshold |
Result:Income is below the threshold, so you get the full deduction. No wage limits apply.
Step 4: Check Overall Income Limit
Make sure the deduction doesn’t exceed 20% of your taxable income:
| Component | Amount |
|---|---|
| Total Taxable Income | $220,000 |
| Less: Capital Gains | -$12,000 |
| Adjusted Income | $208,000 |
| Income Limit (20%) | $41,600 |
Calculation:($220,000 – $12,000) × 0.20 =$41,600
Step 5: Final QBI Deduction
Take the smaller amount:
| Option | Amount |
|---|---|
| Base Deduction | $29,007 |
| Income Limit | $41,600 |
| Your QBI Deduction | $29,007 |
Step 6: Calculate Tax Savings
| Component | Amount |
|---|---|
| QBI Deduction | $29,007 |
| Your Tax Bracket | × 24% |
| Tax Savings | $6,962 |
Calculation:$29,007 × 0.24 =$6,962
Bottom Line:You can deduct$29,007from your taxable income, saving$6,962in federal taxes.
What This Means
This $6,962 tax savings is real money you keep instead of paying to the IRS. The QBI deduction is one of the most valuable tax breaks for small business owners, but it gets complicated if your income is high or you run a service business like consulting or law. Keep good records of wages paid and business property to maximize your deduction if your income exceeds the thresholds.
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