The QBI Deduction: Do Gig Drivers Get the Extra 20% Off?

GigOdo Team · Published July 12, 2026 · Every figure sourced to the IRS unless noted

Do gig drivers get the QBI deduction?

Yes. If you deliver for DoorDash, drive for Uber, or shop for Instacart and file Schedule C as a sole proprietor, you run a qualified trade or business under Section 199A. That entitles you to deduct up to 20% of your qualified business income from taxable income - on top of mileage, on top of the standard deduction.

This is the deduction many drivers skip without knowing it exists, because no platform mentions it and no receipt triggers it. It isn't an expense you incur; it's a percentage the tax code knocks off your business profit before computing income tax. The rest of this post is the 2026 math, from our taxes series for drivers.

What changed in 2025: the deduction is now permanent

The QBI deduction was scheduled to expire after 2025. The One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025) removed that sunset, so Section 199A now applies permanently, and the rate stayed at 20%. For a driver, the planning question shifted from "will it survive?" to "am I claiming everything it allows?"

The 2025 law made two other changes that matter at driver income levels: it widened the phase-in ranges above the high-income thresholds (to $75,000 single / $150,000 joint), and it added a new minimum deduction of $400 for small active businesses, effective for tax years beginning in 2026 (Rev. Proc. 2025-32). Both are covered below.

What counts as your qualified business income

Your QBI is not your gross pay from the apps, and it is not exactly your Schedule C profit either. It starts with net Schedule C profit - earnings minus mileage and other business expenses - then subtracts the self-employment adjustments the IRS says belong to the business: the deductible half of SE tax, plus any self-employed health insurance or retirement deductions you take.

For a typical driver with no health-insurance or retirement deduction, the shortcut is: QBI = net profit minus half your SE tax. Since SE tax is 15.3% on 92.35% of net profit (IRS Topic 554), the deductible half works out to about 7.065% of profit. So QBI is roughly 92.9% of net profit, and 20% of that is about 18.5% of your Schedule C bottom line.

The deduction at real driver profit levels

Here is what the formula produces at common net-profit levels, before the taxable-income cap discussed next. "Half of SE tax" uses the Topic 554 formula; QBI is profit minus that half; the deduction column is 20% of QBI. These are the numbers Form 8995 walks you through in four lines.

Computed from the SE-tax formula in IRS Topic 554 (15.3% on 92.35% of net profit) and the 20% rate in 26 U.S.C. 199A. Amounts rounded to the dollar; assumes no self-employed health insurance or retirement deductions.

The cap that actually bites: 20% of taxable income

The deduction is the lesser of two numbers: 20% of QBI, or 20% of your taxable income minus net capital gain (IRS QBI FAQ). For a single driver whose gig profit is the household's only income, that second number is usually the smaller one - and it's the one that controls.

Worked example: $40,000 net profit, single, standard deduction. Half of SE tax is $2,826, so QBI is $37,174 and 20% of QBI is $7,435. But taxable income is $40,000 minus $2,826 minus the $16,100 standard deduction = $21,074, and 20% of that is $4,215. The deduction is $4,215 - still roughly $500 of income tax saved at a 12% rate, but well under the headline 20%-of-profit figure.

The cap loosens when the household has other income. Make that same driver married to a W-2 earner making $50,000: joint taxable income before QBI is about $54,974 after the $32,200 standard deduction, 20% of which comfortably exceeds $7,435 - so the full 20%-of-QBI amount applies. Same driving, same profit, bigger deduction.

New for 2026: the $400 minimum deduction

Starting with tax years beginning in 2026, if you have at least $1,000 of qualified business income from a business you materially participate in, your QBI deduction is at least $400 - even when the normal formula produces less (Rev. Proc. 2025-32, Section 2.12). Gig drivers materially participate by definition: you personally do the work.

This floor mostly helps very part-time drivers. If your QBI is $1,400, the normal formula gives $280; the minimum lifts it to $400. Both the $400 and the $1,000 qualifying amount will be adjusted for inflation after 2026. You will first see this on the 2026 return you file in early 2027.

The 2026 income thresholds (you are almost certainly under them)

For 2026, QBI limitations only begin when taxable income tops $201,750 single or $403,500 married filing jointly (Rev. Proc. 2025-32). Below those numbers there is no W-2 wage test, no property test, and no phase-out - the simple formula above is the whole computation. Virtually every full-time driver is below them.

Above the thresholds, limits phase in over the next $75,000 (single) or $150,000 (joint) - ranges the 2025 law widened. And a note on classification: the "specified service" businesses that face harsher treatment up there are fields like health, law, accounting, and consulting. Driving and delivery are not among the specified service fields, so gig work is treated as an ordinary qualified business.

How to claim it: Form 8995

Almost every gig driver claims the deduction on Form 8995, a one-page simplified form: your Schedule C profit flows in, the SE adjustments come out, and 20% of the result is compared against the taxable-income cap. Form 8995-A, the long version, is only required above the thresholds or in special cooperative situations (IRS QBI FAQ).

Two things the IRS confirms that surprise people. First, you do not need to itemize - the deduction is available with the standard deduction, and both apply together. Second, most tax software computes it automatically once Schedule C is complete, which means the real risk isn't the form - it's a net-profit number built on incomplete records.

What the QBI deduction does not do

The deduction does not touch self-employment tax. The IRS is explicit: it "does not reduce net earnings from self-employment." You still owe 15.3% SE tax on 92.35% of net profit, which for many drivers is the larger of the two tax bills. QBI reduces only the income-tax side.

It also does not change your quarterly estimated payments mechanically - but it should factor into them. If you're setting aside a flat percentage for taxes, a household that gets the full 20%-of-QBI amount can justify a slightly lower income-tax reserve. And it does not appear on any 1099: as with everything else in driver taxes, the forms platforms send know nothing about your deductions.

Why your records decide the size of it

Every number in the QBI computation flows from your Schedule C profit, and your profit is only as accurate as your records. Here the incentives cut both ways: your mileage deduction at 72.5-76 cents per mile lowers net profit and therefore lowers QBI - and it is still always worth taking, because a dollar of mileage deduction saves both income tax and SE tax, while QBI's 20% touches income tax alone.

The failure mode is the opposite one: a driver with sloppy records who overstates profit doesn't get a bigger real benefit - they pay SE tax and income tax on phantom income that a proper log would have deducted, with only 20 cents on the dollar coming back through QBI. Complete records first, then let the 20% apply to a true number. GigOdo keeps the trip log and expense totals that make that profit number defensible, and its report pack hands your preparer Schedule C-ready totals.

Bottom line

Gig drivers get the QBI deduction, it's now permanent, and for most it's simple: about 18.5% of net profit, capped at 20% of taxable income, claimed on one-page Form 8995 with no itemizing required. It won't cut your SE tax, but at $30,000 of profit it can shelter around $5,600 of income from income tax. Check your last return - if the qualified business income deduction line of your 1040 was blank while Schedule C showed a profit, you left money on the table, and an amended return may get it back.

FAQ

Sources: IRS Rev. Proc. 2025-32 (2026 thresholds sec. 4.26, standard deduction sec. 4.14, $400 minimum sec. 2.12); IRS newsroom, 2026 inflation adjustments; IRS QBI deduction overview; IRS Section 199A FAQs; Instructions for Form 8995; 26 U.S.C. 199A; IRS Topic 554. Worked examples assume no other adjustments and are illustrations, not calculations for your return. This article is general information, not tax advice.