About the QBI Deduction — Section 199A (20% Pass-Through Deduction)
This is a powerful tax strategy available to qualifying taxpayers in 2026. Consult with a Uncle Kam tax advisor to determine if you qualify and how to maximize your savings.
This is a powerful tax strategy available to qualifying taxpayers in 2026. Consult with a Uncle Kam tax advisor to determine if you qualify and how to maximize your savings.
Common questions about the QBI Deduction — Section 199A (20% Pass-Through Deduction) — answered by Uncle Kam's tax advisors.
The QBI deduction allows eligible self-employed individuals and pass-through business owners to deduct up to 20% of their qualified business income from their taxable income. It was created by the Tax Cuts and Jobs Act of 2017 and applies to sole proprietors, S-corp shareholders, partnership partners, and LLC members. Uncle Kam can help you determine if you qualify and maximize this deduction. Book a Free Call →
Most self-employed individuals and pass-through entity owners qualify, including sole proprietors, S-corp shareholders, partners, and LLC members. However, high-income taxpayers in Specified Service Trades or Businesses (SSTBs) — such as law, accounting, consulting, and financial services — face phase-outs above $197,300 (single) or $394,600 (married) in 2026. Book a Free Call →
The deduction is generally the lesser of: (1) 20% of your qualified business income, or (2) 20% of your taxable income minus net capital gains. For high-income taxpayers above the threshold, additional W-2 wage and qualified property limitations apply. The calculation can be complex — Uncle Kam's tax strategists can run the numbers for your specific situation. Book a Free Call →
QBI is the net amount of income, gains, deductions, and losses from any qualified trade or business. It does NOT include W-2 wages, capital gains, dividends, interest income (unless from a business), or reasonable compensation paid to S-corp shareholders. Only income from the active conduct of a trade or business qualifies. Book a Free Call →
Yes — S-corp shareholders can claim the QBI deduction on their share of the S-corp's qualified business income reported on Schedule K-1. However, the reasonable compensation you pay yourself as an S-corp owner is NOT included in QBI — only the remaining business profit qualifies. This is one reason S-corp salary planning is so important. Book a Free Call →
SSTBs include fields like law, accounting, health, consulting, financial services, performing arts, and athletics. If your business is an SSTB and your income exceeds the phase-out threshold ($197,300 single / $394,600 married in 2026), your QBI deduction is reduced or eliminated. Non-SSTB businesses are not subject to this restriction. Book a Free Call →
Yes — the QBI deduction is an above-the-line deduction that reduces your taxable income regardless of whether you itemize or take the standard deduction. This makes it one of the most valuable deductions available to self-employed individuals and business owners. Book a Free Call →
For taxpayers above the income threshold, the QBI deduction is limited to the greater of: (1) 50% of W-2 wages paid by the business, or (2) 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. This is why high-income business owners often benefit from having employees or paying themselves reasonable W-2 wages through an S-corp. Book a Free Call →
Rental income can qualify for the QBI deduction if the rental activity rises to the level of a trade or business under IRC Section 162. The IRS provides a safe harbor: if you spend 250+ hours per year on rental services and maintain proper records, the activity qualifies. Short-term rentals with significant services are more likely to qualify. Book a Free Call →
The QBI deduction under Section 199A is currently scheduled to expire after December 31, 2025, unless Congress extends it. The One Big Beautiful Budget Act (OBBBA) proposed making it permanent and increasing it to 23%. Uncle Kam monitors all legislative changes and will advise you on how to plan accordingly. Book a Free Call →
Yes — if you own multiple pass-through businesses, you can claim the QBI deduction on each one separately. The deductions are then aggregated and limited to 20% of your total taxable income minus net capital gains. Losses from one business can offset income from another in the aggregation. Book a Free Call →
The QBI deduction is calculated on your net self-employment income AFTER the self-employment tax deduction (which reduces your QBI by half of SE tax paid). So maximizing your SE tax deduction also slightly reduces your QBI base. Uncle Kam optimizes both deductions together to minimize your overall tax burden. Book a Free Call →
You need accurate records of all business income and expenses, W-2 wages paid, and the unadjusted basis of qualified property. For rental activities, you need a log of hours spent on rental services. Uncle Kam recommends maintaining a dedicated business bank account and using accounting software to make record-keeping straightforward. Book a Free Call →
Yes — the IRS allows aggregation of commonly owned businesses to maximize the W-2 wage and property limitations. For example, if one business has high QBI but low wages, and another has high wages but low QBI, aggregating them can increase the overall deduction. This election must be made on your tax return and maintained consistently. Book a Free Call →
Potentially yes — S-corp owners can strategically set their salary to optimize the QBI deduction. A lower salary means more profit flows through as QBI (eligible for the 20% deduction), but it must be reasonable to avoid IRS scrutiny. Uncle Kam's strategists can model the optimal salary-to-distribution ratio for your specific income level. Book a Free Call →
The QBI deduction does NOT reduce your AGI — it is a below-the-line deduction that reduces your taxable income directly. This means it doesn't affect AGI-based phase-outs for other deductions or credits. However, it does reduce the income subject to your marginal tax rate, providing significant tax savings. Book a Free Call →
In 2026, the phase-out begins at $197,300 for single filers and $394,600 for married filing jointly. For SSTBs, the deduction is completely phased out $50,000 above these thresholds ($100,000 for MFJ). For non-SSTBs, the W-2 wage and property limitations phase in over the same range. Book a Free Call →
Yes — freelancers and independent contractors who file Schedule C are among the primary beneficiaries of the QBI deduction. If your net self-employment income is below the phase-out threshold and your work is not an SSTB, you can deduct up to 20% of your net business profit. This is one of the most impactful deductions for 1099 workers. Book a Free Call →
The QBI deduction is reported on Form 8995 (simplified) or Form 8995-A (complex situations involving multiple businesses, SSTBs, or high income). The deduction flows to Line 13 of Form 1040. Uncle Kam's tax professionals handle all the complex calculations and form preparation to ensure you claim the maximum deduction. Book a Free Call →
The maximum QBI deduction is 20% of your qualified business income, subject to an overall cap of 20% of your taxable income minus net capital gains. For a business owner with $200,000 in QBI and $250,000 in taxable income, the deduction would be $40,000 (20% of $200,000), saving approximately $14,800 in federal taxes at the 37% rate. Book a Free Call →
Uncle Kam connects you with vetted CPAs and tax advisors who specialize in the QBI Deduction — Section 199A (20% Pass-Through Deduction) and can maximize your savings.
Find a Tax Professional Near You →Our advisors specialize in maximizing deductions like the QBI Deduction — Section 199A (20% Pass-Through Deduction). Book a free strategy call to see exactly how much you can save in 2026.
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