Business Strategy
The QBI Deduction, Demystified
Marcus Chen, CPA · March 28, 2026 · 10 min
The 20% Qualified Business Income deduction is the most misunderstood line on the 1040. Here's what actually qualifies.
QBI applies to pass-through income — sole proprietors, partnerships, S-Corps, and certain rentals. C-Corps don't qualify.
Below the income threshold ($383,900 MFJ in 2026), the deduction is straightforward: 20% of QBI.
Above the threshold, the SSTB phase-out kicks in. Doctors, lawyers, consultants, and financial advisors lose the deduction entirely above the upper limit.
Non-SSTB businesses face the W-2 wages and UBIA tests instead. This is where strategic compensation planning earns its keep.