2020 QBI Deduction Threshold
For 2020, the QBI Deduction Threshold figures are $326,600 (Threshold, joint filers), $163,300 (Threshold, single filers), $426,600 (Phase-in range top, joint filers) and 8 more figures below.
| Item | Joint filers | Single filers | Married filing separately |
|---|---|---|---|
| Threshold | $326,600 | $163,300 | $163,300 |
| Phase-in range top | $426,600 | $213,300 | $213,300 |
Effective 2020-01-01Source: 2020 Instructions for Form 8995-A (IRS)Verified 2026-09-04
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Threshold, joint filers | $321,400 | $326,600 | +$5,200 (+1.6%) |
| Threshold, single filers | $160,700 | $163,300 | +$2,600 (+1.6%) |
| Phase-in range top, joint filers | $421,400 | $426,600 | +$5,200 (+1.2%) |
| Phase-in range top, single filers | $210,700 | $213,300 | +$2,600 (+1.2%) |
| Threshold, married filing separately | $160,725 | $163,300 | +$2,575 (+1.6%) |
| Phase-in range top, married filing separately | $210,725 | $213,300 | +$2,575 (+1.2%) |
| QBI component rate | 20% | 20% | +0% (+0.0%) |
| Taxable income limit rate | 20% | 20% | +0% (+0.0%) |
| W-2 wage limit rate | 50% | 50% | +0% (+0.0%) |
| Alternative W-2 wage rate | 25% | 25% | +0% (+0.0%) |
| Qualified property rate | 2.5% | 2.5% | +0% (+0.0%) |
Threshold
Phase-in range top
$163,300$426,600
One dot per column of the table, on a scale running from the smallest of these amounts to the largest. The scale is logarithmic, so that the amounts crowded at the low end stay far enough apart to read. The table states which dot is which.
Who it applies to
Individuals, estates, and trusts with qualified business income who file federal income tax returns for tax year 2020.
What changed this year, and why
The 2020 QBI deduction threshold amounts and phase-in ranges for the qualified business income deduction under Section 199A, as reported on Form 8995-A.
Common questions
- What is the QBI deduction threshold for 2020?
- For 2020, the threshold is $326,600 for married taxpayers filing jointly and $163,300 for single filers, married filing separately, head of household, qualifying widow(er), and trusts or estates.
- What is the phase-in range for the QBI deduction in 2020?
- For 2020, the phase-in range extends from $326,600 to $426,600 for joint filers and from $163,300 to $213,300 for single filers and all other filing statuses.
Above the threshold, the wage and property limits phase in
The phase-in range is the income band between the threshold and the phase-in range top where the wage and property limits are gradually applied rather than imposed in full. For 2020, joint filers have a phase-in range from $326,600 to $426,600, while single filers and other taxpayers have a range from $163,300 to $213,300. If your taxable income falls within this interval, only a percentage of the wage-and-property limit reduction applies to your qualified business income. The applicable percentage grows as your income rises through the range. Once taxable income reaches the top of the range, the full wage and property caps apply without any phase-in benefit.
Above the threshold but below the phase-in range (more than $326,600 and $426,600 if married filing jointly; $163,300 and $213,300 for all others), the reduction is phased in
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
What the reduction is measured against
The wage and property limit reduces your qualified business income to the greater of two amounts: either 50% of the W-2 wages paid by the qualified trade or business, or 25% of those W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition of qualified property held by the business. This limitation ensures that the QBI deduction is tied to actual payroll and capital investment in the business. The reduction applies when your taxable income exceeds the threshold amount, with the full limitation taking effect once income reaches the top of the phase-in range.
However, if your taxable income (before the QBI deduction) exceeds the threshold ($326,600 if married filing jointly; $163,300 for all others), your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Specified service businesses above the range
Certain professions, including those in health, law, accounting, consulting, and financial services, are classified as specified service trades or businesses. For taxpayers whose taxable income is above both the threshold and the phase-in range, these service businesses are excluded entirely from the definition of qualified trades or businesses. This means income from a specified service business generates no QBI deduction once taxable income exceeds $426,600 for joint filers or $213,300 for single filers. Within the phase-in range, only a partial portion of the QBI from such a business is excluded, with the exclusion growing as income rises.
trades or businesses (SSTBs) aren’t qualified trades or businesses for taxpayers with taxable income, before the QBI deduction, above the threshold and phased-in range.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
The deduction is also capped by taxable income
The overall QBI deduction is subject to an absolute ceiling based on your total taxable income. Specifically, the deduction cannot exceed 20% of your taxable income calculated before the QBI deduction, minus your net capital gain. This cap applies regardless of your qualified business income, wage and property limitations, or any other component of the calculation. Even if your QBI component plus qualified REIT and PTP components would otherwise yield a larger deduction, this taxable income limitation takes precedence and restricts the final deduction amount.
However, the deduction is limited to the lesser of this amount or 20% of your taxable income, calculated before the QBI deduction, minus your net capital gain.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Choosing to aggregate your businesses locks you in for later years
If you choose to aggregate multiple trades or businesses for purposes of the Qualified Business Income Deduction, that choice is not a one-time decision you can revisit each year. The IRS requires that once you have determined which businesses to group together, you must continue to report that same aggregation in every future tax year. The only exception is if a significant change in facts and circumstances occurs that would disqualify the aggregation under the applicable rules. You must complete Schedule B each year to document your aggregation choices, and failure to properly disclose aggregated trades or businesses may result in them being treated as separate. This consistency requirement prevents taxpayers from reshuffling their business groupings year to year to maximize their deduction based on fluctuating income levels or changing business conditions.
Your aggregations must be reported consistently for all subsequent years, unless there is a significant change in facts and circumstances that disqualify the aggregation.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Crossing the threshold changes which form you must file
Your taxable income determines which IRS form you use to calculate your Qualified Business Income Deduction. If your 2020 taxable income before the QBI deduction exceeds $163,300 for single filers or $326,600 for married filing jointly, or if you are a patron in a specified agricultural or horticultural cooperative, you must use Form 8995-A to figure your deduction. Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction. The simplified form is designed for taxpayers below the threshold amounts who have more straightforward situations. Once your income crosses above these threshold levels, you need the more detailed form to work through additional limitations and calculations that the simplified computation does not address.
Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
A loss year does not just vanish, it reduces next year's deduction
A net qualified business income loss from a given tax year does not simply disappear; it is carried forward and applied against future qualified business income. The loss amount must be reported on the same line of the IRS form in the next tax year and will reduce whatever QBI you generate in later years, even if the trade or business that produced the original loss no longer exists. The carryforward operates independently of any other loss-limitation rules in the Internal Revenue Code, but its only effect for QBI purposes is to shrink the pool of income eligible for the deduction in the years it is applied.
This amount will offset QBI in subsequent tax years regardless of whether it is reported and whether the trade or business that generated the loss is still in existence.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
The self-employment tax and health insurance deductions you take elsewhere still shrink QBI here
Certain deductions you claim elsewhere on your return - notably the deductible half of self-employment tax, the self-employed health insurance deduction, and contributions to qualified retirement plans - must be subtracted when you calculate your qualified business income. These amounts are attributable to the trade or business and therefore reduce the QBI figure that feeds into the deduction computation. The result is that the same dollar of expense cannot be deducted both as an above-the-line adjustment and again as part of the QBI deduction, so the two benefits are coordinated rather than duplicated.
This includes, but isn’t limited to, unreimbursed partnership expenses, business interest expense, deductible part of self-employment tax, self-employment health insurance deduction, and contributions to qualified retirement plans.
2020 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2020 Instructions for Form 8995-A (IRS)
- Threshold, joint filers
exceeds the threshold ($326,600 if married filing jointly; $163,300 for all others)
- Threshold, single filers
exceeds the threshold ($326,600 if married filing jointly; $163,300 for all others)
- Phase-in range top, joint filers
phase-in range (more than $326,600 and $426,600 if married filing jointly; $163,300 and $213,300 for all others)
- Phase-in range top, single filers
phase-in range (more than $326,600 and $426,600 if married filing jointly; $163,300 and $213,300 for all others)
- Threshold, married filing separately
Your 2020 taxable income before your QBI deduction is more than $163,300 if single, married filing separately, head of household, qualifying widow(er), or a trust or estate ($326,600 if married filing jointly); or
- Phase-in range top, married filing separately
$163,300 but not more than $213,300 if single, married filing separately, head of household, qualifying widow(er), or a trust or estate ($326,600 and $426,600 if married filing jointly)
- QBI component rate
Your QBI component is generally 20% of your QBI from your domestic trades or businesses.
- Taxable income limit rate
However, the deduction is limited to the lesser of this amount or 20% of your taxable income, calculated before the QBI deduction, minus your net capital gain.
- W-2 wage limit rate
your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business.
- Alternative W-2 wage rate
your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business.
- Qualified property rate
your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business.