2023 QBI Deduction Threshold
For 2023, the QBI Deduction Threshold figures are $364,200 (Threshold, joint filers), $182,100 (Threshold, single filers), $464,200 (Phase-in range top, joint filers) and 8 more figures below.
| Item | Joint filers | Single filers | Married filing separately |
|---|---|---|---|
| Threshold | $364,200 | $182,100 | $182,100 |
| Phase-in range top | $464,200 | $232,100 | $232,100 |
Effective 2023-01-01Source: Rev. Proc. 2022-38 (IRS)Verified 2026-09-04
QBI component rate, Taxable income limit rate, W-2 wage limit rate, Alternative W-2 wage rate, Qualified property rateSource: 2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)Verified 2026-09-04
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Threshold, joint filers | $340,100 | $364,200 | +$24,100 (+7.1%) |
| Threshold, single filers | $170,050 | $182,100 | +$12,050 (+7.1%) |
| Phase-in range top, joint filers | $440,100 | $464,200 | +$24,100 (+5.5%) |
| Phase-in range top, single filers | $220,050 | $232,100 | +$12,050 (+5.5%) |
| Threshold, married filing separately | $170,050 | $182,100 | +$12,050 (+7.1%) |
| Phase-in range top, married filing separately | $220,050 | $232,100 | +$12,050 (+5.5%) |
| 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
$182,100$464,200
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
Taxpayers who claim the Qualified Business Income deduction on their federal income tax return for taxable years beginning in 2023.
What changed this year, and why
For taxable years beginning in 2023, the IRS set new threshold and phase-in range amounts for the Qualified Business Income (QBI) deduction under Section 199A.
Common questions
- What is the QBI deduction threshold for joint filers in 2023?
- For taxable years beginning in 2023, the QBI deduction threshold for married individuals filing jointly is $364,200. The phase-in range tops out at $464,200.
- What is the QBI deduction threshold for single filers in 2023?
- For taxable years beginning in 2023, the QBI deduction threshold for single filers (and all other filing statuses) is $182,100. The phase-in range tops out at $232,100.
- What happens when taxable income exceeds the threshold?
- When taxable income exceeds the threshold, the QBI deduction begins to phase in over a range. For joint filers, the phase-in range runs from the threshold to the phase-in range top. For all other filers, the phase-in range similarly runs from the threshold to the phase-in range top. Above the top of the phase-in range, limitations based on wages and the unadjusted basis of qualified property may reduce or eliminate the deduction.
Above the threshold, the wage and property limits phase in
When taxable income exceeds the threshold, the wage and property limitation does not apply all at once. The IRS phases the reduction in gradually for taxpayers whose income falls between the threshold and the top of the phase-in range. For 2023, joint filers see the phase-in between the threshold of $364,200 and $464,200, while single filers and all other returns see it between the threshold of $182,100 and $232,100. Within this band, the reduction percentage increases gradually from zero at the threshold to full application at the phase-in range top. Taxpayers with income at or below the threshold do not need to reduce their qualified business income at all. Once taxable income surpasses the phase-in range top, the full wage and property limitation applies without any phase-in benefit. This graduated approach means that taxpayers just above the threshold face only a modest reduction, while those closer to the range top face a much larger one.
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 $364,200 and $464,200 if married filing jointly, and $182,100 and $232,100 for all other returns), the reduction is phased in; or • Above the threshold and phase-in range, the full reduction applies.
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
What the reduction is measured against
When taxable income exceeds the threshold, the QBI from each qualified trade or business may be limited by the wage and property formula. This formula sets the maximum allowable deduction from each business at the greater of two amounts: either 50% of the W-2 wages paid by that business, or 25% of the W-2 wages plus 2.5% of the unadjusted basis of qualified property held by the business. This limitation applies regardless of whether the business generates substantial qualified business income on its own. The purpose is to ensure that the deduction is tied to real economic activity measured by wages or depreciable assets. Taxpayers whose income falls within the phase-in range experience this limitation partially, while those above the phase-in range face it in full. The verified threshold figures for 2023 are $364,200 for joint filers and $182,100 for single filers.
However, if your taxable income (before the QBI deduction) exceeds the threshold ($364,200 if married filing jointly, and $182,100 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.
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Specified service businesses above the range
Specified service trades or businesses receive different treatment under the QBI deduction rules depending on taxable income levels. For taxpayers whose income falls below the threshold or within the phase-in range, SSTB income may still qualify for the deduction, though it may be subject to the wage and property limitation. However, once taxable income exceeds the threshold plus the phase-in range - $464,200 for joint filers and $232,100 for single filers in 2023 - SSTBs are completely excluded from the definition of qualified trades or businesses. This means that no qualified business income, W-2 wages, or unadjusted basis of qualified property from the specified service trade or business can be taken into account when calculating the QBI deduction. The same exclusion applies to pass-through items if the SSTB is conducted through a pass-through entity. This complete disallowance above the phase-in range top ensures that high-income service professionals such as doctors, lawyers, and consultants cannot benefit from the deduction once their income reaches these levels.
SSTBs are generally excluded from the definition of a qualified trade or business if the taxpayer's taxable income exceeds the threshold plus the phase-in range. Therefore, no QBI, W-2 wages, or UBIA of qualified property from the specified service trade or business are taken into account in figuring your QBI deduction.
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
The deduction is also capped by taxable income
The qualified business income deduction cannot exceed a ceiling based on total taxable income. Specifically, the deduction equals the lesser of the QBI component plus REIT and PTP income, or 20% of taxable income calculated before the QBI deduction, reduced by net capital gain plus any qualified dividends. This overall cap applies to all taxpayers regardless of income level and operates independently of the wage and property limitations that apply when taxable income exceeds the threshold. Even if a business generates substantial qualified business income and pays significant wages, the total deduction from all sources cannot surpass this taxable income ceiling. The net capital gain reduction prevents taxpayers from using the QBI deduction to shelter investment gains. This limitation must be calculated after determining the QBI component for each business and after applying any wage and property restrictions that may apply above the threshold levels.
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 (increased by any qualified dividends).
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Choosing to aggregate your businesses locks you in for later years
If you own more than one qualified trade or business, the IRS allows you to combine two or more of them into a single aggregation for purposes of calculating the qualified business income deduction. Once you make that choice and report it on Schedule B (Form 8995-A), you are generally bound to keep the same grouping every year going forward. You may not drop or rearrange the businesses you originally grouped together in later years. The only way out is if a significant change in facts and circumstances occurs that disqualifies the aggregation under the rules. Each year you must still complete Schedule B to show the aggregation, including any aggregation of a passthrough entity in which you hold a direct or indirect interest. If you fail to disclose the aggregated trades or businesses, the IRS may treat them as disaggregated, which could reduce or eliminate the deduction you are able to claim on the grouped operations.
Your aggregations must be reported consistently for all subsequent years, unless there is a significant change in facts and circumstances that disqualify the aggregation.
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Crossing the threshold changes which form you must file
The IRS provides two versions of the form for computing the qualified business income deduction, and your taxable income determines which one you must use. Individuals and eligible estates and trusts use Form 8995-A if their 2023 taxable income before the QBI deduction is more than $364,200 for married filing jointly, or more than $182,100 for all other returns, or if they are a patron in a specified agricultural or horticultural cooperative. Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction. The simplified form is designed for taxpayers whose taxable income falls at or below the threshold amounts and who do not need the more detailed computation. Note that S corporations and partnerships do not file either form because they are not eligible for the deduction; instead, they must pass through the necessary information to their shareholders or partners on an attachment to Schedule K-1.
Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction.
2023 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 your qualified business income from a trade or business produces a net loss for the year, that loss does not simply disappear. Instead, the loss amount must be carried forward and treated as a negative QBI figure in the next tax year. This carryforward reduces the QBI from that business, or from your overall QBI, in the years that follow. The rule applies whether or not you actually report the loss on the return, and it continues to apply even if the trade or business that generated the loss no longer exists. The carryforward operates only for purposes of computing the QBI deduction; it does not change how the loss is treated under any other provision of the Internal Revenue Code, such as the at-risk or passive activity loss rules. If you have an overall qualified business net loss for the year, you generally do not qualify for a QBI deduction in that year unless you have other QBI to offset the loss.
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.
2023 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 figure your qualified business income, you must start with the net amount attributable to the trade or business and then reduce it by certain deductions that are claimed elsewhere on your return. These include the deductible part of self-employment tax, the self-employment health insurance deduction, and contributions to qualified retirement plans. Even though each of these deductions appears on a different line or schedule, they are all treated as attributable to the trade or business and must be subtracted before arriving at QBI. Many taxpayers overlook this step because these amounts are not shown on the Schedule K-1 or Schedule C that reports the business income, but failing to reduce QBI by these items will overstate the deduction. For sole proprietors, partners, and LLC members, review your self-employment tax computation, above-the-line health insurance deduction, and retirement plan contributions each year to ensure the QBI figure is correctly reduced.
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.
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Your own S corporation salary or partnership guaranteed payment is not QBI
Not every dollar you receive from a business you own counts as qualified business income. The instructions list several categories of items that are specifically excluded from QBI. Among these are amounts received as reasonable compensation from an S corporation, amounts received as guaranteed payments from a partnership, and amounts received as payments by a partner for services other than in a capacity as a partner. These payments are treated as compensation for your personal services rather than as a return on the business itself. Even though they are taxed to you as ordinary income, they do not enter into the QBI computation. The practical effect is that an S corporation shareholder who receives a salary, or a partner who receives a guaranteed payment, cannot count that compensation toward the QBI deduction. Only the remaining net income of the business, after those compensation amounts are excluded, qualifies as QBI for purposes of the deduction.
Amounts received as reasonable compensation from an S corporation. • Amounts received as guaranteed payments. • Amounts received as payments by a partner for services other than in a capacity as a partner.
2023 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.
Rev. Proc. 2022-38 (IRS)
- Threshold, joint filers
Married Individuals Filing Joint Returns $364,200
- Threshold, single filers
All Other Returns $182,100
- Phase-in range top, joint filers
Married Individuals Filing Joint Returns $364,200 $464,200
- Phase-in range top, single filers
All Other Returns $182,100 $232,100
- Threshold, married filing separately
Married Individuals Filing Separate Returns $182,100 $232,100
- Phase-in range top, married filing separately
Married Individuals Filing Separate Returns $182,100 $232,100
2023 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
- 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 (increased by any qualified dividends).
- 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.