If you are self-employed, two numbers drive a big piece of your tax bill: the 15.3% self-employment (SE) tax on your net earnings, and the 20% qualified business income (QBI) deduction that can take a large bite out of the income side.
Self-employment tax in 2026
The SE tax is the self-employed version of FICA. It has two parts:
- 12.4% for Social Security, on net earnings up to the 2026 wage base of $184,500
- 2.9% for Medicare, on all net earnings (no ceiling)
- Plus a 0.9% Additional Medicare Tax on SE income above $200,000 (single) or $250,000 (married filing jointly)
So the headline rate is 15.3% up to the Social Security base, then 2.9% (or 3.8% above the Medicare surtax threshold) on earnings above it. You deduct half of your SE tax on Form 1040, which lowers your adjusted gross income.
The QBI deduction is now permanent
The Section 199A deduction lets owners of pass-through businesses (sole proprietors, partners, S corporation shareholders) deduct up to 20% of qualified business income. The 2017 law had it expiring after 2025; the One Big Beautiful Bill made it permanent and widened the phase-out range.
2026 QBI income thresholds
The limits are based on your total taxable income, not just business profit:
- Full 20% deduction below about $201,800 (single) and $403,500 (married filing jointly)
- The deduction phases out across a $75,000 (single) / $150,000 (joint) band
- It reaches zero at about $276,800 (single) and $553,500 (joint)
A new minimum: if your QBI from an actively managed business is at least $1,000 and you materially participate, you get at least a $400 deduction even where wage limits would otherwise zero it out.
Service businesses face a harder cliff
If your work is a specified service trade or business (health, law, accounting, consulting, financial services, and similar), the deduction disappears entirely once taxable income clears the top of the phase-out range. There is no wage or property workaround for SSTBs above that line.
Numbers: a solo consultant
A single consultant with $160,000 of net SE income and no other income:
- SE tax: 15.3% of $160,000 ≈ $24,480 (half deductible)
- QBI: 20% of $160,000 = $32,000 deduction, well within the full-deduction zone
- That $32,000 drops taxable income to about $128,000 before other items
Because the QBI deduction is "below the line," it reduces taxable income but not AGI.
Disclaimer: This article is general educational information, not tax, legal, or investment advice. Dollar amounts come from the 2026 sources listed at the end of this article and may change. Before you act, talk to a licensed CPA, EA, or tax attorney about your own situation.