The QBI deduction for freelancers in 2026

For most freelancers, QBI is the largest deduction they never see, because tax software applies it on its own. It's worth knowing how it works, because it explains why your income tax is lower than a bracket table suggests and why it can drop sharply above a certain income. This post sits in our taxes and expenses hub and builds on the freelance tax deductions checklist.

Who qualifies

Any sole proprietor or single-member LLC owner with a profit on Schedule C can take it, and so can partners and S corporation owners on their share of business income. You don't have to itemize. Wages from a job, capital gains and interest unrelated to the business don't count as qualified business income. Per the IRS QBI page, the deduction applies to tax years starting after 2017, and P.L. 119-21 made it permanent for years after 2025.

What counts as qualified business income

  Schedule C net profit
- Deductible half of self-employment tax
- Self-employed health insurance deduction
- Retirement contributions for yourself (SEP, solo 401(k)) tied to the business
= Qualified business income (QBI)

Deduction below the threshold = the smaller of:
  20% x QBI
  20% x (taxable income before QBI - net capital gain)

2026 thresholds and how they changed

The thresholds apply to taxable income before the QBI deduction, not to your profit. A single freelancer with $220,000 of Schedule C profit and no other income is still under the 2026 threshold, because half of self-employment tax and the standard deduction come off first.

Is your work a specified service business?

Above the threshold, the law treats specified service trades or businesses (SSTBs) more harshly. The list covers health, law, accounting, actuarial science, performing arts, consulting, athletics, financial and brokerage services, investment management and trading, plus businesses whose main asset is the owner's reputation or skill, which the regulations limit to endorsement, appearance and likeness fees. Engineering and architecture are excluded by the statute. Writers, designers, developers, photographers and virtual assistants usually aren't SSTBs, but a freelancer whose work is advice to clients may be counted as consulting. Below the threshold, none of this matters.

Worked example 1: $85,000 web developer

Worked example 2: $260,000, designer vs consultant

These examples leave out the 0.9% Additional Medicare Tax, state tax and any other income. They show the shape of the rule; Form 8995-A does the exact math.

Things that change your QBI

• Health insurance and retirement contributions lower QBI as well as taxable income, so a $6,000 SEP contribution doesn't save the full $6,000 times your rate.
• A business loss doesn't give a negative deduction. It carries forward and reduces QBI in later years.
• Two businesses (say, design and a small online shop) are combined on the form, and a loss in one reduces the other's QBI.
• Raising deductible expenses near the threshold can move you below it, which matters most for SSTBs.
• QBI doesn't reduce self-employment tax or your AGI, so it doesn't help with credits or limits based on AGI.

How it shows up on your return

1. Finish Schedule C and Schedule SE first: QBI starts from the profit and the half-SE-tax deduction.
2. Figure the self-employed health insurance and retirement deductions on Schedule 1.
3. Use Form 8995 if taxable income before QBI is at or under the threshold; otherwise Form 8995-A.
4. Carry the deduction to Form 1040, where it comes off after the standard deduction.

Our self-employment tax calculator leaves QBI out of its income tax estimate on purpose, so the figure stays on the cautious side. How much to set aside for taxes shows the same four profit levels with QBI included, and the quarterly estimated taxes guide covers payment dates.

Doing this in SoloWOS

SoloWOS doesn't calculate QBI or fill tax forms. What it gives you is the profit figure QBI starts from: Expenses > Reports puts paid invoices next to the costs you log and shows profit for each month and the year to date. If you're near the threshold in the fall, that number tells you early. You can log business expenses with receipts and export the year to CSV for whoever prepares Form 8995.

This is general information on section 199A for 2026, simplified for a sole proprietor without employees. It isn't tax advice. Above the threshold, or if your work might be a specified service business, have a tax professional run Form 8995-A.