2026 §199A QBI phase-in ranges: single $201,750–$276,750, MFJ $403,500–$553,500

The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) made the §199A qualified business income deduction permanent and expanded the phase-in range by $75,000 (single) and $150,000 (MFJ) relative to the TCJA-era numbers. IRS Rev. Proc. 2025-32 inflation-adjusted the dollar figures for tax year 2026:

• Single: $201,750 (start) → $276,750 (full phase-in)
• MFJ: $403,500 (start) → $553,500 (full phase-in)

Background: what §199A does

Section 199A allows eligible taxpayers to deduct up to 20% of qualified business income (QBI) from a pass-through entity — including sole proprietorships, S Corporations, partnerships, and LLCs taxed as pass-through. The deduction was originally introduced by the Tax Cuts and Jobs Act of 2017 and was set to expire after 2025. The OBBBA made it permanent, removing the sunset uncertainty that had surrounded the provision since its enactment.

The deduction is claimed on the taxpayer’s individual return (Form 1040, Section 199A) and reduces taxable income — it is not a credit. For a taxpayer in the 24% marginal bracket, a $10,000 QBI deduction saves $2,400 in federal income tax. The deduction does not reduce self-employment tax, FICA, or state-level taxes in most states.

How the phase-in works

Above the threshold amounts, the QBI deduction is limited by the greater of (a) 50% of W-2 wages paid by the business, or (b) 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property. Between the start and end of the phase-in range, the limitation is gradually phased in, reducing the effective deduction.

For taxpayers below the threshold — which covers most small S-Corp owners — the deduction is straightforward: 20% of QBI, limited only by taxable income (the deduction cannot exceed 20% of taxable income less net capital gains). The W-2 wage and UBIA limitations do not apply.

What this means for the calculator

The BizTaxMetrics S-Corp W-2 drag is an upper-bound approximation (ownerSalary × 20% × marginal rate). Above the phase-in range, the real §199A picture depends on the W-2/UBIA limit (greater of 50% of W-2 wages or 25% of W-2 wages + 2.5% of UBIA) and on whether the business is an SSTB. The toggle on the homepage is now useful for taxpayers in the $200K–$300K range who weren’t getting meaningful drag signals under the old (TCJA) thresholds.

The OBBBA’s expanded phase-in range means more taxpayers can claim the full 20% deduction without hitting the W-2 wage limitation. For a single filers with QBI below $201,750, the full 20% deduction applies with no wage test. Between $201,750 and $276,750, the deduction is partially phased in based on wages. Above $276,750, the full wage limitation applies (or the SSTB rules apply if the business is a specified service trade or business).

Why this matters for S-Corp owners

The S-Corp election reduces the owner’s QBI base (because salary is excluded from QBI but distributions are not subject to FICA). This is the “QBI drag” the BizTaxMetrics calculator models. With the higher phase-in thresholds, the drag is less punitive for taxpayers in the $200K–$550K income range because they are more likely to qualify for the full deduction even with reduced QBI.

However, for most small S-Corp owners earning under $200K, the practical impact is minimal — they were already below the TCJA thresholds and will continue to claim the full 20% deduction. The main beneficiaries of the OBBBA expansion are higher-income pass-through owners who were previously phased out of the deduction entirely.

Sources

• H.R. 1, Title I §1101xx (OBBBA QBI provisions)
• IRS Rev. Proc. 2025-32, §3.10 (2026 inflation adjustments)
• IRS §199A FAQs
• BizTaxMetrics glossary: QBI