2023 QBI Deduction Threshold
For 2023, the QBI Deduction Threshold is $364,200 (Threshold, joint filers), $182,100 (Threshold, single filers), $464,200 (Phase-in range top, joint filers) and $232,100 (Phase-in range top, single filers).
| Item | Joint filers | Single filers |
|---|---|---|
| Threshold | $364,200 | $182,100 |
| Phase-in range top | $464,200 | $232,100 |
Effective 2023-01-01Source: Rev. Proc. 2022-38 (IRS)Verified 2026-08-29
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%) |
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)
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