QBI Entity Selection Calculator 2026
Run scenario planning across five legal-entity structures and see which one keeps the most cash in your pocket. It uses verified 2026 §199A thresholds, the W-2 and UBIA limitation, SSTB phase-outs, the OBBBA $400 minimum deduction, and the 21% C-Corp rate.
Entity choice is one of the biggest tax decisions a business owner makes. The same operating profit can land very differently depending on whether you report it on a Schedule C, hold it in a rental on Schedule E, run it through a partnership K-1, split it between salary and distributions in an S-Corporation, or leave it inside a C-Corporation. The calculator above runs all five at once so you can compare them on one number: net cash to the owner.
The two taxes that drive the decision
Two forces pull in opposite directions here. The first is employment tax. Sole proprietors and general partners pay 15.3% self-employment tax on their earnings, S-Corp owners pay FICA only on a reasonable W-2 salary, and rental owners pay neither. The second is the §199A QBI deduction, worth up to 20% of qualified business income. Anything that cuts employment tax, like raising an S-Corp salary, tends to shrink the QBI base, so the best entity is the one that comes out ahead after both.
2026 §199A thresholds and the wage limit
Below $403,500 of taxable income for joint filers, or $201,750 for Single and Head of Household ($201,775 for Married Filing Separately), the 20% deduction applies cleanly. Inside the phase-out range — up to $553,500 for MFJ, $276,750 for Single/HOH, or $276,775 for MFS — the W-2 and UBIA limit phases in: your deduction is capped at the greater of 50% of W-2 wages, or 25% of W-2 wages plus 2.5% of UBIA. Above the top of the range the cap binds in full. A Specified Service Trade or Business (health, law, accounting, consulting, financial services, and the like) loses the deduction entirely once taxable income clears the upper threshold.
The new OBBBA $400 floor
Starting in 2026, the One Big Beautiful Bill Act sets a minimum QBI deduction of $400 for any taxpayer with at least $1,000 of active qualified business income, meaning a trade or business they materially participate in. It is a small floor, but it keeps tiny active businesses from being shut out of §199A entirely. One thing it does not do is revive a fully phased-out SSTB: above the upper threshold an SSTB has no qualified business income, so there is nothing for the floor to lift. The calculator applies the floor wherever it genuinely applies.
Reading the matrix
Each column runs the same operating profit through one entity's rules: net business income, owner taxable income before and after the QBI deduction, SE or payroll tax, federal income tax, corporate tax where it applies, total taxes, and finally the net cash the owner keeps. The winning column, the one with the highest net cash, is highlighted in green. Change the salary, UBIA, filing status, or SSTB answer and the winner shifts as you type. These are 2026 federal estimates only. They leave out state tax and are not a substitute for advice from a CPA.
Example 1: High-income service business
Inputs: an SSTB consultant with $1,000,000 of profit, $200,000 of W-2 wages to staff, $5,000,000 of property, filing jointly.
Result: the business QBI deduction is $0 in every pass-through column.
Why: once taxable income clears $553,500 (MFJ), an SSTB stops being a qualified business. Wages and property cannot rescue it, and the $400 floor does not apply because there is no qualified business income left.
Example 2: Capital-heavy business with equipment or property
Inputs: $800,000 of profit, only $20,000 of W-2 wages, but $3,000,000 of UBIA, filing jointly.
Result: QBI lands at $80,000.
Why: with low wages, the 50% of W-2 wages test is only $10,000. The second test, 25% of wages plus 2.5% of UBIA, comes to $80,000 and wins. The property does the heavy lifting.
Example 3: S-Corp salary trade-off
Inputs: $580,000 of net business income and a $150,000 reasonable salary, filing jointly.
Result: the S-Corp K-1 keeps the most cash.
Why: paying yourself a salary instead of taking everything as profit trims the SE and FICA bill, and that salary also lifts the QBI wage cap so the deduction holds up. The cost is that salary is not QBI, so you tune the number to balance both.
What is the QBI deduction and which entities qualify? +
The §199A Qualified Business Income deduction lets owners of pass-through businesses deduct up to 20% of their qualified business income. It applies to sole proprietors (Schedule C/F), qualifying rentals (Schedule E), partnerships, and S-Corporations. A C-Corporation gets no QBI deduction; its profit is taxed at the flat 21% corporate rate instead. The one piece available to everyone is the personal 20% deduction on REIT and PTP dividends.
What are the 2026 QBI phase-out thresholds? +
For 2026 the §199A taxable-income thresholds are $403,500 to $553,500 for Married Filing Jointly, $201,775 to $276,775 for Married Filing Separately, and $201,750 to $276,750 for Single and Head of Household. MFS is its own figure, slightly above half of the joint amount, per Rev. Proc. 2025-32. Below the lower threshold you get the full 20% with no wage limit. Inside the range the W-2 wage and UBIA limitation phases in. Above the upper threshold the limit applies in full, and an SSTB gets nothing.
How does the W-2 wage and UBIA limitation work? +
Once taxable income passes the threshold, your QBI deduction is capped at the greater of 50% of the business's W-2 wages, or 25% of W-2 wages plus 2.5% of the unadjusted basis (UBIA) of qualified property. That is why an S-Corp can beat a sole proprietorship for high earners: the owner's reasonable salary counts as W-2 wages and lifts the cap. Businesses that hold a lot of property lean on the 2.5% UBIA piece.
What is the OBBBA $400 minimum QBI deduction? +
Under the One Big Beautiful Bill Act, starting in 2026 the QBI deduction is at least $400 when the taxpayer has at least $1,000 of active qualified business income from a trade or business in which they materially participate. It does not rescue a fully phased-out SSTB, because once an SSTB is past the upper threshold it is no longer a qualified business and has no QBI for the floor to lift. The calculator applies the floor only where it genuinely belongs.
Why does an S-Corp often beat a sole proprietorship? +
A sole proprietor pays 15.3% self-employment tax on essentially all net profit. An S-Corp owner pays FICA only on a reasonable W-2 salary, and the rest passes through on the K-1 free of SE and FICA tax. That salary also counts toward the QBI wage limit. The catch is payroll administration, plus the fact that salary is excluded from QBI, so the best salary balances FICA savings against a smaller QBI base. The matrix shows both effects at once.
Is the C-Corp net cash figure comparable to the others? +
It depends on the toggle. When Distribute C-Corp profit is on, the calculator adds the second layer of dividend tax and NIIT, so the C-Corp result is comparable to spendable owner cash. When it is off, the figure is retained corporate value, not cash in the owner's pocket, and you should not read it that way. The page flags the retained case so the comparison stays honest either way.
The 2026 figures come from official IRS guidance. This tool models federal tax only. It excludes state tax, and the NIIT and C-Corp distribution assumptions are set by the toggles in the calculator.