If at all possible, you want to qualify for the 20 percent tax deduction that tax code Section 199A gives to

proprietorships, partnerships, and S corporations (pass-through entities).

Thanks to the One Big Beautiful Bill Act (OBBBA), that deduction is now permanent, so this planning pays off year after year.

If you own one business, you can run into complications qualifying for the Section 199A deduction.

With multiple businesses, you have more choices—and those additional choices make for more complications and decisions.

Consider this article your help desk.

We’ll show you, step by step, how to figure your correct Section 199A deduction when you have multiple

businesses, how aggregation can rescue an otherwise lost deduction, and how to enter your businesses correctly in the 2026 Section 199A calculator.

What’s New for 2026

Three OBBBA changes shape your 199A planning beginning in 2026:

• Permanent deduction. Section 199A no longer expires after 2025. The 20 percent deduction is now a lasting part of your tax planning.

• Wider phase-in ranges. The phase-in range grows from $50,000 to $75,000 (single or head of household) and from $100,000 to $150,000 (married, filing jointly).

• A new $400 minimum deduction. If you have at least $1,000 of QBI from an active trade or business in which you materially participate, you get a minimum $400 deduction. As you’ll see, this floor interacts in a tricky way with the business-by-business calculation.

Basic Rules—Below the Threshold

If your taxable income is equal to or below the 2026 threshold of $403,500 (married, filing jointly) or $201,750 (single or head of household), follow the three steps below to determine your Section 199A deduction with multiple businesses or activities:

Step 1. Multiply each trade or business’s qualified business income (QBI) by 20 percent, and add the results. This is your QBI component. (If a business has a loss, don’t treat it as zero—offset it against your profitable businesses first, as described under “If You Have Losses.”)

Step 2. Add 20 percent of your qualified REIT (real estate investment trust) dividends and qualified publicly traded partnership income.

This is your “combined qualified business income amount.”

Step 3. Your Section 199A deduction is the lesser of (a) your combined qualified business income amount or (b) 20 percent of your taxable income (after subtracting net capital gains).

“Easy” Example

John and Sarah, who file jointly, have taxable income of $300,000 (below the threshold) before any Section 199A deduction and the following income items:

• John is a sole proprietor with net income of $100,000.

• Sarah is a 100 percent S corporation owner. She pays herself sufficient reasonable compensation, and the resulting pass-through QBI is $150,000.

• John and Sarah have $5,000 in net capital gains from investments and $1,000 in ordinary income from qualified publicly traded partnerships.

Step 1. John and Sarah are below the $403,500 threshold, so their 20 percent qualified business income amount is straightforward:

• John’s QBI deduction is 20 percent of the $100,000 proprietorship income, or $20,000.

• Sarah’s QBI deduction is 20 percent of the $150,000 S corporation net income, or $30,000.

Step 2. Here we add the combined QBI deductions and 20 percent of the qualified publicly traded partnership income, for a total of $50,200:

• John’s deduction of $20,000,

• Sarah’s deduction of $30,000, and

• $200 from the qualified publicly traded partnerships (20 percent of $1,000).

Step 3. Compare the combined QBI amount of $50,200 to the taxable income limit, which here is $59,000 (($300,000 - $5,000) × 20 percent).

John and Sarah’s Section 199A deduction is $50,200, the lesser of $50,200 or $59,000.

Above the Threshold—Aggregation Not Elected

If you do not elect aggregation and you have taxable income above $276,750 (single or head of household) or $553,500 (married, filing jointly), you apply the following additions to the rules above:

• If you have an out-of-favor specified service business, its QBI amount is $0 because your income is above the top of the phase-in range. The new $400 minimum does not rescue it: above the range, the specified service business is no longer a qualified trade or business and produces no QBI to support the floor.

• For your in-favor businesses, you apply the wage and qualified property limitation on a business-by- business basis to determine your QBI amount.

The wage and property limitation works like this: For each business, you find the lesser of

• 20 percent of the QBI for that business, or

• the greater of (a) 50 percent of the W-2 wages for that business or (b) the sum of 25 percent of the W-2 wages for that business plus 2.5 percent of the unadjusted basis immediately after acquisition of qualified property for that business.

Key point. You are not likely to make (or want to make) these computations by hand or with an Excel spreadsheet. We know that. That’s why we provide a calculator for your use, as we explain below.

If You Are in the Phase-In Range

If your taxable income is between $201,750 and $276,750 (single/head of household) or between $403,500 and $553,500 (joint), you are in the phase-in range. There you apply the phase-in protocol, as discussed in Tax Reform: Will Section 199A Phase In or Phase Out Your 20 Percent Deduction?

If You Have Losses

If any of your trades or businesses (including an aggregated trade or business) produces negative QBI for the year, you must use that negative QBI to offset the positive QBI of your other trades or businesses, apportioning it among them in proportion to their relative amounts of positive QBI.

You offset with the negative QBI only—you do not carry the W-2 wages or qualified property of a loss business over to the businesses whose QBI you are reducing.

If your overall QBI for the year is negative, your Section 199A deduction is zero for the year, and you carry the negative amount forward to the next tax year.

Example. Harry has two pass-through businesses, A and B. In 2026, A shows a business loss of $100,000 and B has QBI of $60,000. Harry must carry the excess $40,000 qualified business loss forward to 2027. He gets no Section 199A deduction in 2026.

In 2027, A’s QBI is $90,000, and B’s QBI is $30,000. Harry allocates the $40,000 carryforward loss pro rata between the two businesses, reducing A’s QBI to $60,000 and B’s QBI to $20,000.

Aggregation of Businesses—Qualification

The Section 199A regulations let you aggregate businesses so that you make only one Section 199A calculation, using the combined QBI, wage, and qualified property amounts.

To aggregate businesses for Section 199A purposes, you must show that

• you, or a group of people, directly or indirectly own 50 percent or more of each business for a majority of the taxable year;

• you report all items for each business on returns with the same taxable year (not counting short taxable years); 

• none of the businesses to be aggregated is an out-of-favor specified service business; and

• your businesses satisfy at least two of the following three factors, based on the facts and circumstances:

1. The businesses provide products or services that are the same or that are customarily offered together.

2. The businesses share facilities or share significant centralized business elements, such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources.

3. The businesses operate in coordination with, or in reliance on, one or more of the businesses in the aggregated group (for example, supply-chain interdependencies).

Choosing to Aggregate

If you aggregate your businesses, you must

• consistently report the aggregated businesses in all later taxable years, and

• attach an annual statement to your return each year, identifying each aggregated business.

You can add a new business to an existing aggregation if it meets the requirements above.

If a prior aggregation no longer qualifies, the aggregation no longer exists and you must reapply the rules to determine your new permissible aggregation.

Key point. You benefit from aggregating mainly when you have a trade or business whose Section 199A deduction would disappear, or mostly disappear, for lack of wages and/or qualified property.

Example. Sue, who is single, has taxable income above the phase-in range (in excess of $276,750) and two businesses that qualify for aggregation:

• her 100 percent owned S corporation, with $120,000 in wages, no qualified property, and $100,000 in pass-through business income; and

• a sole proprietorship with $20,000 of net income and no wages or qualified property.

If Sue does not aggregate:

• The S corporation gets a $20,000 Section 199A deduction (20 percent of $100,000). Because 50 percent of its wages is $60,000, Sue qualifies for the full 20 percent.

• The sole proprietorship gets no Section 199A deduction, because Sue’s income is above the upper threshold and the proprietorship has neither wages nor qualified property.

• Sue’s total Section 199A deduction is $20,000.

If Sue aggregates:

• Sue makes one Section 199A computation using $120,000 of combined QBI, $120,000 of combined wages, and no qualified property.

• Sue’s total Section 199A deduction is $24,000.

• Aggregation increased Sue’s deduction by $4,000.

Caution: The Bradford Tax Institute Calculator Is Business by Business, without Aggregation

Your Section 199A deduction becomes more complicated when you have

• multiple in-favor trades or businesses, and

• taxable income greater than $553,500 (married, filing jointly) or $276,750 (single or head of household).

   With multiple businesses and taxable income above those amounts, the 2026 Section 199A calculator computes one business at a time. If you don’t elect aggregation, you must enter each business separately and add the results yourself.

Why does this matter?

Because the business-by-business result can be dramatically different from the aggregated result.

Let’s look at an actual situation in which entering three businesses as one aggregated business produces a

$94,131 Section 199A deduction, but entering them as three individual businesses produces a deduction of only $37,340.

Facts. Jake is married, with Form 1040 taxable income of $691,657. He operates the three businesses shown below, where we list the QBI, W-2 wages, and unadjusted basis immediately after acquisition of qualified property:

Business    QBI          W-2 Wages          Property

1. Rental    $70,844      $6,000                $435,069

2. S corp.   $124,813    $215,000            $13,878

3. Sch. C   $275,000        $0                         $0

Totals       $470,657        $221,000         $448,947

Aggregation. If Jake can properly elect to aggregate the three businesses as one, he enters the totals above in the calculator and gets a $94,131 deduction:

No aggregation. If Jake does not qualify for or does not want aggregation, he treats each business separately, which gives him a Section 199A deduction of only $37,340:

• $12,377 on business 1,

• ·$24,963 on business 2, and

• $0 on business 3.

To see why the difference is so large, we’ll enter each business in the calculator.

Business 1. Jake’s taxable income remains $691,657, as under aggregation. That high taxable income means Jake gets no Section 199A benefit from business 1 without wages or property. Here, the wages-and-property combination (25 percent of $6,000 plus 2.5 percent of $435,069) produces his deduction:

Business 2. Again, note the $691,657 taxable income, which means Jake needs wages and/or property to qualify. Jake’s $24,963 deduction is 20 percent of the $124,813 QBI, which is less than 50 percent of the wages. The wages are what let Jake use the full QBI calculation:

Business 3. With taxable income above $553,500, Jake needs wages and/or property to get any Section 199A deduction. Business 3 has neither. Business 3 is going to produce a zero 199A deduction. 

But you may think: Hey, wait! What about the minimum $400 deduction?

The $400 minimum is a single floor on your entire Section 199A deduction—not a per-business amount.

Jake’s business-by-business deduction is the sum of the three regular results—$12,377 + $24,963 + $0 = $37,340 —and because that total already far exceeds $400, the minimum adds nothing.

Takeaways

If your 2026 taxable income is $403,500 or less (married, filing jointly) or $201,750 or less (single or head of household), you can relax about multiple businesses: you don’t need wages or property to qualify, so there’s no aggregation question to wrestle with.

Once your taxable income climbs above those thresholds, multiple businesses bring calculations and decisions:

• If you don’t aggregate, you should compute your QBI amount business by business, then add the results before applying the taxable income limitation.

• When you use the calculator without aggregating, enter each business separately—and remember that the $400 minimum is a once-per-return floor, not a per-business bonus.

• If one business has a loss, allocate it pro rata to your profitable businesses, reducing your overall deduction.

• You may qualify to aggregate, and aggregation may enhance or even create your deduction—as it did for Jake, lifting his deduction from $37,340 to $94,131.

Because Section 199A is now permanent, it’s worth getting these choices right. The payoff repeats every year.