The ordinary QBI deduction starts with adjusted qualified income, then applies business and household limits. The 2026 active minimum is a separate final comparison. A payroll illustration must also account for reduced QBI, costs and taxable income; maximizing a deduction alone does not establish the best cash outcome.

Adjusted QBI and the ordinary cap

QBI is not gross revenue. Allocable deductions, including deductible SE tax, health insurance and retirement contributions, affect it. Taxable income before QBI is entered separately after other deductions. Net capital gain and qualified dividends reduce the ordinary 20% income cap, but remain in the phase-in income test.

The W-2 wage and UBIA limit

The ordinary wage/property ceiling is the greater of 50% of applicable business W-2 wages or 25% of those wages plus 2.5% of applicable UBIA. Its restriction phases in over the selected-year range. For an SSTB, applicable-percentage scaling comes first. The ordinary income cap and qualifying active minimum are separate later steps.

The SSTB cliff

An SSTB uses only the applicable percentage of QBI, business wages and UBIA inside the phase-in range. The wage restriction is then applied to those scaled amounts. At full exclusion, no qualified business base remains for the active minimum. Verify the statutory classification; a broad job description alone does not establish it.

The S-corp salary tension

Owner salary can increase qualified wages while reducing QBI. The separate S-corporation illustration starts from explicitly entered pre-owner-compensation profit, other employee wages and cost proxies. Salary transfers income rather than reducing household taxable income twice. Its 2% grid compares modeled owner cash, not legal reasonable compensation or an exact tax optimum.

What this tool models — and what it does not

This calculator follows the Form 8995-A logic for a single trade or business. It does not model multi-business aggregation, REIT dividends or publicly traded partnership income (which form a separate 20% component), qualified cooperative income, or loss carryforwards. If your situation involves any of those, treat the result as an estimate and confirm the figures with a tax professional.