The QBI deduction for 2026: the 20% write-off most freelancers can claim

The qualified business income (QBI) deduction, also called the Section 199A deduction, lets most freelancers, sole proprietors and single-member LLC owners deduct up to 20% of their business profit from their taxable income. You don't have to spend anything to get it, and you get it whether you itemize or take the standard deduction.

It was due to expire after 2025. The One, Big, Beautiful Bill made it permanent and added a small minimum deduction starting in 2026.

Who can take it

You can claim it if you have profit from a business you run as a:

• sole proprietor or single-member LLC that files Schedule C,
• partner in a partnership, or
• shareholder in an S corporation.

It doesn't apply to wages from a job, to the salary an S corporation pays you, or to income earned through a C corporation. Investment income such as capital gains and most interest doesn't count either.

How much it's worth

The deduction is the smaller of these two amounts:

1. 20% of your qualified business income. For a sole proprietor that's roughly your Schedule C profit minus the deductible half of self-employment tax, the self-employed health insurance deduction and retirement plan contributions for yourself.
2. 20% of your taxable income before the QBI deduction, minus any net capital gain.

The second limit is the one that catches most freelancers, because the standard deduction comes off before it's applied.

Example: single, $75,000 profit, no other income (2026)

Step	Amount
Net profit	$75,000
Minus half of self-employment tax	−$5,299
Qualified business income	$69,701
20% of QBI	$13,940
Taxable income before QBI ($69,701 − $16,100 standard deduction)	$53,601
20% of that	$10,720
QBI deduction (the smaller one)	$10,720

Knocking $10,720 off taxable income saves this person about $1,600 of income tax, since some of that income would have been taxed at 22% and the rest at 12%. It doesn't reduce self-employment tax, which is worked out on your profit before any of this.

New for 2026: a $400 minimum

From 2026, if you have at least $1,000 of qualified business income from businesses you materially participate in, your deduction is at least $400. For 2027 those figures rise to $415 and $1,030.

This helps people with small side businesses. Someone with a $50,000 W-2 job and a $1,500 side hustle has about $1,394 of qualified business income. Twenty percent of that is only $279, so the minimum lifts their deduction to $400. Material participation usually means you do the work yourself: for example, more than 500 hours in the year, or you're the only person who works in the business.

The income thresholds

Below these amounts of taxable income (before the QBI deduction), the simple calculation above is all there is:

Filing status	2026	2027
Single, head of household	$201,750	$208,300
Married filing separately	$201,775	$208,325
Married filing jointly	$403,500	$416,600

Above the threshold, two extra rules phase in over the next $75,000 ($150,000 married filing jointly):

• Specified service businesses lose the deduction. These include health, law, accounting, actuarial work, consulting, financial services, performing arts, athletics and any business whose main asset is the skill or reputation of its owners or employees.
• For other businesses, the deduction can be limited by the W-2 wages the business pays and the cost of its equipment and property. A solo freelancer with no employees can lose most of it above the range.

Most freelancers are well under the threshold, so neither rule applies to them.

How to claim it

There's no box to tick on Schedule C. You work it out on a separate form and the result goes on your Form 1040:

• Form 8995 if your taxable income before the QBI deduction is at or below the threshold. It's one page.
• Form 8995-A if you're above it, or if you're a patron of an agricultural cooperative.

Tax software fills it in from your Schedule C. If a business had a loss, the loss carries forward and reduces next year's QBI.

Using it in your quarterly estimates

Because the deduction lowers income tax, it lowers your quarterly payments too. Our free calculator includes it automatically, assuming no employees, and so does the Paid & Filed workbook. If you work it out by hand, remember that it comes off taxable income, not off the tax itself. A $10,000 deduction in the 12% bracket saves $1,200, not $10,000.