2021 QBI Deduction Threshold
For 2021, the QBI Deduction Threshold figures are $329,800 (Threshold, joint filers), $164,900 (Threshold, single filers), $429,800 (Phase-in range top, joint filers) and 8 more figures below.
| Item | Joint filers | Single filers | Married filing separately |
|---|---|---|---|
| Threshold | $329,800 | $164,900 | $164,925 |
| Phase-in range top | $429,800 | $214,900 | $214,925 |
Effective 2021-01-01Source: 2021 Instructions for Form 8995-A (IRS)Verified 2026-09-04
Compared with 2020
| Item | 2020 | 2021 | Change |
|---|---|---|---|
| Threshold, joint filers | $326,600 | $329,800 | +$3,200 (+1.0%) |
| Threshold, single filers | $163,300 | $164,900 | +$1,600 (+1.0%) |
| Phase-in range top, joint filers | $426,600 | $429,800 | +$3,200 (+0.8%) |
| Phase-in range top, single filers | $213,300 | $214,900 | +$1,600 (+0.8%) |
| Threshold, married filing separately | $163,300 | $164,925 | +$1,625 (+1.0%) |
| Phase-in range top, married filing separately | $213,300 | $214,925 | +$1,625 (+0.8%) |
| 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
$164,900$429,800
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 that claim the qualified business income deduction under Section 199A and file a 2021 federal income tax return.
What changed this year, and why
The IRS increased the taxable income thresholds at which limitations on the qualified business income (QBI) deduction begin to apply. For 2021, the threshold is $329,800 for joint filers and $164,900 for single filers, up from $326,600 and $163,300 in 2020. The top of the phase-in range rose to $429,800 for joint filers and $214,900 for single filers, from $426,600 and $213,300 in 2020.
Common questions
- What is the QBI deduction threshold for 2021?
- For 2021, the QBI deduction threshold is $329,800 for joint filers and $164,900 for single filers. These are the taxable income levels (before the QBI deduction) above which limitations on the deduction may begin to apply.
- What happens when taxable income exceeds the threshold?
- If your taxable income before the QBI deduction is at or below the threshold, no reduction to your qualified business income is required. Above the threshold but at or below the phase-in range top ($429,800 for joint filers, $214,900 for single filers), a partial reduction is phased in. Above the phase-in range top, the full reduction applies based on wages paid by the business and the unadjusted basis of qualified property.
- How do the 2021 thresholds compare with prior years?
- For 2020, the threshold was $326,600 for joint filers and $163,300 for single filers. The 2021 amounts are higher.
Above the threshold, the wage and property limits phase in
When taxable income before the QBI deduction exceeds the threshold, the wage and property limits don't apply immediately. Instead, they phase in gradually across a range. For 2021, if your taxable income falls between the threshold and the top of the phase-in range - more than $329,800 up to $429,800 for married filing jointly, or more than $164,900 up to $214,900 for single filers - your QBI reduction is only partial. The higher your income within this range, the greater the portion of the wage and property limit that applies. Once income exceeds $429,800 (joint) or $214,900 (single), the full reduction applies, meaning the deduction is completely subject to the wage and property floor. If income is at or below the threshold, no reduction to QBI is needed at all. This phase-in mechanism ensures a smooth transition rather than an abrupt cutoff.
If your taxable income (before the QBI deduction) is: • At or below the threshold, you don’t need to reduce your QBI; • Above the threshold but below the phase-in range (more than $329,800 and $429,800 if married filing jointly; $164,925 and $214,925 for married filing separately, and $164,900 and $214,900 for all other returns), the reduction is phased in; or • Above the threshold and phase-in range, the full reduction applies.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
What the reduction is measured against
When taxable income before the QBI deduction exceeds the threshold of $329,800 for joint filers or $164,900 for single filers, the deduction for each trade or business may be partially or fully limited. The limitation compares the QBI amount to the greater of two formulas: 50% of the W-2 wages paid by that qualified trade or business, or 25% of those W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the business. This wage and property floor applies regardless of whether the business itself generates significant QBI. The purpose is to tie the deduction more closely to the business's actual payroll and capital investment when higher-income taxpayers claim it. If taxable income is at or below the threshold, this reduction does not apply and the full QBI amount flows through to the deduction calculation.
However, if your taxable income (before the QBI deduction) exceeds the threshold ($329,800 if married filing jointly; $164,925 for married filing separately, and $164,900 for all other returns), 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.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Specified service businesses above the range
Specified service trades or businesses (SSTBs) - such as those in law, health, accounting, consulting, and financial services - face stricter rules when the taxpayer's income is high. For taxpayers with taxable income before the QBI deduction that falls above the threshold and through the phase-in range, QBI from an SSTB may be partially or fully excluded from the deduction. Once taxable income exceeds the top of the phase-in range ($429,800 for joint filers or $214,900 for single filers), an SSTB is not a qualified trade or business at all, meaning none of its income counts toward the QBI deduction. Between the threshold and the phase-in range top, a percentage of the SSTB's QBI is gradually disallowed. Below the threshold, SSTB income is treated the same as any other qualified business income.
Specified service 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.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
The deduction is also capped by taxable income
Even after calculating the QBI component and any qualified REIT or PTP amounts, the total deduction cannot exceed a cap based on overall taxable income. Specifically, the deduction is limited to the lesser of the computed QBI amount or 20% of taxable income, calculated before the QBI deduction, minus net capital gain. This means that if your total qualified business income is large relative to your other income, the deduction may be reduced to stay within 20% of taxable income (net of capital gains). The cap applies to all taxpayers regardless of income level or the type of trade or business. It ensures the deduction does not shelter more than one-fifth of a taxpayer's overall taxable income from taxation. Net capital gains are subtracted because they are already taxed at preferential rates.
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.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Choosing to aggregate your businesses locks you in for later years
For 2021, the IRS requires that once you choose to aggregate multiple trades or businesses for the qualified business income deduction, that choice carries forward. The aggregation you report on Schedule B (Form 8995-A) must be the same one you use in every later year, unless a significant change in facts and circumstances disqualifies the grouping. You must complete Schedule B each year to show the aggregation, and you must also include any aggregation done by a relevant pass-through entity in which you hold a direct or indirect interest. If you fail to disclose an aggregated trade or business consistently, the IRS may disaggregate it. In other words, you cannot reshuffle which businesses you group together from year to year; the election, once made, binds your future filings unless the underlying facts shift enough to break the group apart.
If you choose to aggregate multiple trades or businesses, complete Schedule B (Form 8995-A) before starting Part I of Form 8995-A. Your aggregations must be reported consistently for all subsequent years, unless there is a significant change in facts and circumstances that disqualify the aggregation. Schedule B (Form 8995-A) must be completed each year to show your trade or business aggregation(s) and must include any aggregation of an RPE in which you hold a direct or indirect interest. Failure to disclose such aggregated trades or businesses may cause them to be disaggregated.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Crossing the threshold changes which form you must file
For the 2021 tax year, the Internal Revenue Service determines which version of the qualified business income deduction form a taxpayer must file based on whether taxable income exceeds certain thresholds. Taxpayers whose 2021 taxable income (calculated before the QBI deduction) is more than $329,800 if married filing jointly, or more than $164,900 for all other filing statuses, must use the full Form 8995-A along with its required schedules. Those same taxpayers, along with patrons of specified agricultural or horticultural cooperatives, must also use Form 8995-A. If your taxable income falls at or below those thresholds and you are not a cooperative patron, you do not file Form 8995-A; instead, you file the simpler Form 8995, Qualified Business Income Deduction Simplified Computation. The threshold therefore controls not only whether certain limitations apply but which form the deduction is calculated on.
Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction.
2021 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
A loss year does not just vanish, it reduces next year's deduction
When one of your qualified trades or businesses produces a net loss in a given year, that loss does not simply disappear. The IRS requires you to carry it forward, and it offsets QBI in subsequent tax years regardless of whether it was reported and whether the trade or business that generated the loss is still in existence. The amount is carried to the next tax year on Schedule C (Form 8995-A), line 2, or Form 8995, line 3, as a qualified business net loss carryforward from prior years. This carryforward operates independently of other loss-limitation rules in the Code - it does not affect the deductibility of the loss for purposes of any other provisions. In practical terms, a year in which your qualified business income is negative still has a consequence: the loss reduces the QBI you can claim in future years, shrinking your qualified business income deduction until the carryforward is fully used.
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. This carryforward doesn’t affect the deductibility of the loss for purposes of any other provisions of the Code.
2021 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
When you calculate qualified business income for 2021, the IRS requires you to account for deductions you may have already taken elsewhere on your return. To figure the total amount of QBI, you must consider all items that are attributable to the trade or business. 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. These deductions reduce your QBI even though you claim them on other parts of your tax return. For example, the deductible half of your self-employment tax and your self-employed health insurance premium are subtracted from your business income before it qualifies for the QBI deduction. Similarly, contributions you make to a qualified retirement plan reduce the amount of QBI you can claim. In short, these ordinary business-related deductions shrink your qualified business income, and you cannot count the same dollar twice - once as a deduction and again as the basis for the QBI deduction.
To figure the total amount of QBI, you must consider all items that are attributable to the trade or business. 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.
2021 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.
2021 Instructions for Form 8995-A (IRS)
- Threshold, joint filers
Your 2021 taxable income before your QBI deduction is more than $329,800 married filing jointly, $164,925 for married filing separately, and $164,900 for all other returns
- Threshold, single filers
Your 2021 taxable income before your QBI deduction is more than $329,800 married filing jointly, $164,925 for married filing separately, and $164,900 for all other returns
- Phase-in range top, joint filers
phase-in range (more than $329,800 and $429,800 if married filing jointly; $164,925 and $214,925 for married filing separately, and $164,900 and $214,900 for all other returns)
- Phase-in range top, single filers
phase-in range (more than $329,800 and $429,800 if married filing jointly; $164,925 and $214,925 for married filing separately, and $164,900 and $214,900 for all other returns)
- Threshold, married filing separately
Your 2021 taxable income before your QBI deduction is more than $329,800 married filing jointly, $164,925 for married filing separately, and $164,900 for all other returns
- Phase-in range top, married filing separately
phase-in range (more than $329,800 and $429,800 if married filing jointly; $164,925 and $214,925 for married filing separately, and $164,900 and $214,900 for all other returns)
- 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.