The QBI deduction for freelancers

Up to 20% of your qualified business income comes off your taxable income. irs.gov For a sole proprietor it is usually the largest single deduction available, and it requires nothing of you — no spending, no election, no form beyond the return itself.

Three things about it changed or are widely got wrong, and all three are below.

What it is worth

Net profit	Total federal tax	Effective rate
$20,000	$3,025	15.1%
$50,000	$9,732	19.5%
$100,000	$22,365	22.4%
$180,000	$47,058	26.1%
$250,000	$66,954	26.8%
$300,000	$92,249	30.7%

Total federal tax with the QBI deduction applied at each level — single filer, TX (no state income tax), tax year 2026. These figures are generated from the same engine the calculator runs, not typed in — every constant is listed with its source.

What the deduction itself comes to

Net profit	QBI deduction	Roughly worth, at a 22% rate
$50,000	$6,073.52	$1,336
$100,000	$15,367.04	$3,381
$180,000	$30,236.68	—
$250,000	$33,677.24	—
$300,000	$5,946.02	—

Look at the last two rows. The deduction rises to a peak and then falls off a cliff — $33,677 at $250,000 of profit, $5,946 at $300,000.

That drop is the phase-out, and it is the part most calculators get wrong.

New for 2026: the $400 minimum

The One Big Beautiful Bill amended Section 199A to add a minimum deduction of $400 for anyone with at least $1,000 of qualified business income. irs.gov It takes effect for tax years beginning after 31 December 2025, so 2026 is the first year it applies.

Where the minimum bites

Qualified business income	Taxable income	Deduction
$16,728	$628	$400 — the minimum, since 20% of taxable income is only $126
$5,000	$1,500	$400
$1,200	$800	$400
$1,000	$5,000	$400 — exactly at the gate, so it qualifies
$900	$5,000	$0 — below the $1,000 threshold, nothing at all

Two edges worth knowing. Below $1,000 of qualified business income there is no deduction at all, not a reduced one. And at exactly $1,000 the minimum applies, because the gate is “less than $1,000” rather than “at most”.

Both figures become inflation-adjusted after 2026. irs.gov

Almost nothing on the market models this yet, because it is new. If a calculator gives a freelancer with $18,000 of profit a QBI deduction of $126, it is running 2025 rules.

The phase-out, and why it is brutal for a solo operator

Below a taxable income of $201,750 for a single filer, the deduction is a straightforward 20%. irs.gov Above it, limitations based on W-2 wages you pay and property you own phase in, reaching full effect at $276,750.

For a freelancer with no employees, W-2 wages paid are zero. So above the ceiling the limitation drives the ordinary deduction to zero, and only the new $400 minimum remains.

The thresholds are $403,500 and $553,500 for married filing jointly. And there is a detail that looks like a typo and is not: single and head of household are $201,750, while married filing separately is $201,775. Twenty-five dollars apart. irs.gov

If you are a “specified service” business

Consulting, law, accounting, health, financial services, performing arts, athletics and any business whose principal asset is the reputation or skill of its employees are specified service trades or businesses.

Below the threshold, that classification does nothing — an SSTB gets the same 20%.

Above the phase-in ceiling, the income stops being qualified business income at all. And because the $400 minimum requires $1,000 of qualified business income to exist, it cannot rescue an excluded SSTB. The deduction is zero, not $400.

The same income, two classifications

$400,000 of business income, $300,000 of taxable income, single filer:

	Deduction
Not an SSTB	$400 — the ordinary computation is limited to zero, the minimum applies
An SSTB	$0 — the income is excluded entirely, so the minimum has nothing to attach to

That distinction is worth a conversation with a preparer if you are near the threshold, because whether a business is an SSTB is a question of facts rather than of arithmetic.

What counts, and what does not

Counts: net profit from a sole proprietorship, partnership or S-corp, from a US trade or business.

Does not count: wages you receive as an employee, capital gains, interest and dividends, foreign income, and — importantly for anyone considering the election — reasonable salary paid to yourself from an S-corp, which is wages rather than business income.

The QBI base is also reduced by the deductible half of self-employment tax before the 20% applies, which is why the deduction is never exactly a fifth of your profit. The deductible half covers the ordering.

What this site does not model

The calculators here assume no W-2 wages paid and no qualified property. That covers the great majority of solo operators and is stated on the tool page rather than assumed silently.

If you pay employees, the wage and property limitation applies in a form this engine does not compute, and the figure needs a preparer. The tool says so rather than returning a number that looks authoritative.