2021 QBI Deduction Threshold
For 2021, the QBI Deduction Threshold is $329,800 (Threshold, joint filers), $164,900 (Threshold, single filers), $429,800 (Phase-in range top, joint filers) and $214,900 (Phase-in range top, single filers).
| Item | Joint filers | Single filers |
|---|---|---|
| Threshold | $329,800 | $164,900 |
| Phase-in range top | $429,800 | $214,900 |
Effective 2021-01-01Source: 2021 Instructions for Form 8995-A (IRS)Verified 2026-08-29
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%) |
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)
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)