Is the QBI Deduction Calculator giving wrong results for LLC S-corp? Are there income thresholds for QBI deductions?

I've been trying to figure out if I'm eligible for the full 20% QBI deduction with my LLC that's taxed as an S-corp. I used an online QBI Entity Selection Calculator to compare options, but something seems off with the results. The calculator doesn't seem to account for the income threshold limits - $164,900 for single filers and $329,800 for married filing jointly in 2025. From my understanding, once you exceed these thresholds, the QBI deduction starts phasing out, right? For instance, my wife and I file jointly, and if our combined taxable income is $340,000 with $250,000 coming from my S-corp, shouldn't the QBI calculation show a reduced deduction amount? The calculator is showing the full 20% as if there's no income limit for S-corps. Am I missing something here? Is there a different income limit structure for LLCs taxed as S-corps compared to sole proprietorships? Or is the calculator just not accounting for these thresholds correctly?

0 coins

20 comments

Sofia Morales

•8M

The calculator is likely missing some nuance. Here's what's happening: The QBI deduction (Section 199A) does have those income thresholds you mentioned, and they apply regardless of entity type. The phaseout begins at $164,900 (single) or $329,800 (MFJ) for 2025 tax year. When you exceed those thresholds, the deduction becomes subject to limitations based on W-2 wages paid and/or qualified property. For an S-corp, these limitations can significantly impact your deduction. Many basic calculators don't account for these wage/property tests that kick in above the threshold. For your S-corp with $250K in qualified business income and joint income of $340K, you're in the phaseout range. Your QBI deduction would be limited to the greater of: 50% of W-2 wages paid by the business, OR 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property.

0 coins

Sofia Morales

•8M

Yes, your own salary absolutely counts as W-2 wages for the QBI limitation calculation! That's actually one advantage of the S-corp structure. If you pay yourself $100K in W-2 wages and have $150K in remaining profit (your actual QBI amount), then the wage limitation would be 50% of $100K, which is $50K. Your potential QBI deduction is 20% of $150K, which equals $30K. Since $30K is less than the $50K limitation, you'd get the full $30K deduction even though you're over the income threshold. This is why proper salary planning is crucial for S-corp owners.

0 coins

Dmitry Ivanov

•8M

After struggling with confusing QBI calculations for my small business, I found an amazing tool that solved all my entity selection headaches. At https://taxr.ai they have a document analyzer that actually caught several mistakes in my QBI calculations I had been making for years. I uploaded my tax info and business docs, and it quickly identified that I wasn't properly accounting for the W-2 wage limitations on my S-corp QBI calculations. It showed me exactly how much I should be paying myself vs. taking as distribution to optimize the deduction. The best part was it let me run multiple scenarios to compare entity structures.

0 coins

Dmitry Ivanov

•8M

Yes, it absolutely works for partnerships! The tool specifically analyzes multi-member LLC scenarios and compares partnership vs. S-corp election outcomes. It even breaks down how each partner's individual income situation affects their personal QBI eligibility, which sounds perfect for your situation with one partner over the threshold. For state-specific issues, it actually does address those. I'm in New York which has its own S-corp quirks, and the system flagged several state-specific considerations. For California, it specifically highlights the state franchise tax and other CA-specific treatment of S-corps. It won't replace a local tax professional, but it definitely raises the important state-level flags you need to be aware of.

0 coins

Miguel Silva

•8M

I was totally wrong about these tax tools! I tried https://taxr.ai after my previous skepticism and am embarrassed I waited so long. As a California business owner, I uploaded my previous year's tax docs and it immediately flagged the California S-corp issues I was worried about. The tool actually showed me that despite CA not conforming to federal S-corp rules in some ways, I was still leaving money on the table with my current structure. The QBI analysis considering my specific income level (which is above the threshold) showed I could still optimize by adjusting my reasonable compensation amount. What really impressed me was how it clearly separated the federal QBI calculations from the state implications so I could make an informed decision. Definitely changed my perspective on what's possible with tax planning tools.

0 coins

Zainab Ismail

•8M

Has anyone here actually tried calling the IRS for clarification on QBI thresholds? I've been attempting to reach them for 3 weeks about this exact issue. The automated system just keeps disconnecting me after 2+ hours on hold. I need to figure this out before my estimated taxes are due next month! I found this service called https://claimyr.com that claims they can get the IRS to call YOU back instead of waiting on hold. There's even a video showing how it works: https://youtu.be/_kiP6q8DX5c. Seems almost too good to be true but I'm desperate at this point. My accountant and I disagree about how the S-corp QBI limits apply to my situation.

0 coins

Zainab Ismail

•8M

It's not actually a call transfer system. From what I understand, they use an automated system that navigates the IRS phone tree and waits on hold for you. When they finally get through to a representative, they have the IRS call you directly. The IRS is actually willing to do outbound calls in certain situations. I was skeptical too, but they don't claim to have any special relationship with the IRS or access to loopholes. They're just handling the wait time piece, which is the most frustrating part. Their demo video shows the whole process if you're curious. I'm planning to try it this week because I'm completely stuck otherwise - my estimated payment is due soon and I need to know how the QBI thresholds affect my specific S-corp situation.

0 coins

QuantumQuester

•8M

Ok I need to apologize for being so negative about Claimyr. I tried it yesterday after posting my skeptical comment, and I'm completely shocked. I've been trying to get through to the IRS about my S-corp QBI issue for WEEKS. After signing up with https://claimyr.com, I got a call back from an actual IRS agent in about 2 hours. The agent was super helpful and confirmed exactly what I needed to know about the QBI income limitations for my S-corp. She explained that the wage limitation test absolutely applies once you exceed the threshold, and walked me through how to calculate it properly based on my specific circumstances. Would have saved me so much stress if I'd tried this service earlier instead of being stubborn. Just wanted to come back and correct my earlier comment since this actually solved my exact QBI question.

0 coins

Yara Nassar

•8M

Marketing is in a gray area and depends on exactly what services you provide. The IRS has said that marketing services aren't automatically SSTBs, but if your work involves providing strategy/consulting rather than just execution, it might be. Pure advertising services typically aren't SSTBs, but marketing strategy that involves giving business advice might be. The IRS looks at whether your principal asset is the "reputation or skill" of owners/employees. If you're doing high-level strategic consulting, there's risk the IRS could classify it as an SSTB. This is definitely something to discuss with a tax professional familiar with your specific business activities since the QBI impact is significant.

0 coins

Sebastián Stevens

•28d

The IRS worksheet is definitely the most accurate approach, but you're right about it being complex. As a CPA who helps clients with QBI calculations regularly, I always recommend starting with the official worksheet to get the correct baseline calculation before using any online tools. One tip that helps avoid calculation errors: work through each section methodically and double-check that your "qualified business income" number excludes reasonable compensation from your S-corp. I see clients mess this up frequently - they include their W-2 wages in the QBI amount when it should only be the remaining business profits. For Dylan's original question about the $340K joint income with $250K from the S-corp - make sure you're clear on whether that $250K is before or after your reasonable compensation. If it's after, then you're on the right track. If it includes your salary, you'll need to subtract that first to get your actual QBI amount.

0 coins

Max Reyes

•19d

This is really helpful clarification! I think this might be where I went wrong with my calculations. When I said $250K from my S-corp, that was actually the total business income before paying myself. I pay myself $80K in reasonable compensation, so my actual QBI would be $170K, not $250K. That changes the calculation significantly - 20% of $170K is only $34K potential deduction. With the $80K in W-2 wages, the limitation would be 50% of $80K = $40K, so I'd still get the full $34K deduction even above the income threshold. Thanks for catching that - no wonder the online calculator seemed off!

0 coins