2025 QBI Deduction Threshold
For 2025, the QBI Deduction Threshold figures are $394,600 (Threshold, joint filers), $197,300 (Threshold, single filers), $494,600 (Phase-in range top, joint filers) and 8 more figures below.
| Item | Joint filers | Single filers | Married filing separately |
|---|---|---|---|
| Threshold | $394,600 | $197,300 | $197,300 |
| Phase-in range top | $494,600 | $247,300 | $247,300 |
Effective 2025-01-01Source: Rev. Proc. 2024-40 (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: 2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)Verified 2026-09-04
Compared with 2024
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Threshold, joint filers | $383,900 | $394,600 | +$10,700 (+2.8%) |
| Threshold, single filers | $191,950 | $197,300 | +$5,350 (+2.8%) |
| Phase-in range top, joint filers | $483,900 | $494,600 | +$10,700 (+2.2%) |
| Phase-in range top, single filers | $241,950 | $247,300 | +$5,350 (+2.2%) |
| Threshold, married filing separately | $191,950 | $197,300 | +$5,350 (+2.8%) |
| Phase-in range top, married filing separately | $241,950 | $247,300 | +$5,350 (+2.2%) |
| 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
$197,300$494,600
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
The threshold amount matters to a taxpayer claiming the qualified business income deduction under § 199A for a taxable year beginning in 2025, and which figure applies depends only on filing status. Rev. Proc. 2024-40 puts married individuals filing joint returns on $394,600 and puts every other return, including a single filer, a head of household and a married individual filing separately, on $197,300. The revenue procedure supplies the amounts and nothing else: the rules in § 199A that use the threshold and the phase-in range, including how a specified service trade or business is treated once income passes the threshold, are in the Code section rather than in this document.
What changed this year, and why
For taxable years beginning in 2025, Rev. Proc. 2024-40 sets the threshold amount under § 199A(e) at $394,600 for married individuals filing joint returns and at $197,300 for all other returns, including married individuals filing separate returns. Alongside each threshold the revenue procedure states a phase-in range amount under § 199A(b) and § 199A(d), and in every row that range amount is larger than the threshold amount it sits beside. All of these are inflation-adjusted items, generally determined by reference to § 1(f), and the procedure states them for Code provisions as in effect on October 22, 2024.
Common questions
- What is the 2025 QBI deduction threshold for married filing jointly?
- For taxable years beginning in 2025 the threshold amount under § 199A(e) for married individuals filing joint returns is $394,600. Rev. Proc. 2024-40 states it in the qualified business income item, alongside a separate and larger phase-in range amount for the same filing status. The threshold is the point the § 199A rules key off; the revenue procedure sets the number without restating what happens above it.
- What is the 2025 QBI threshold for a single filer?
- $197,300. Rev. Proc. 2024-40 groups single filers under all other returns, which carries a threshold amount of $197,300 under § 199A(e) for taxable years beginning in 2025. That row also carries its own phase-in range amount, which is larger than the threshold. A single filer therefore works from a lower threshold than the $394,600 that applies to a joint return.
- What is the QBI threshold for married filing separately in 2025?
- The table in Rev. Proc. 2024-40 lists married individuals filing separate returns as their own row, and for taxable years beginning in 2025 it carries the same threshold amount as all other returns, $197,300. The phase-in range amount for that row matches the all other returns row as well. Filing separately therefore does not give a couple two joint-level thresholds.
- What is the QBI threshold for head of household in 2025?
- Rev. Proc. 2024-40 does not give heads of household a row of their own. The qualified business income table has three rows: married individuals filing joint returns, married individuals filing separate returns, and all other returns. A head of household falls in all other returns, so the threshold amount for taxable years beginning in 2025 is $197,300 and the phase-in range amount is the one stated in that same row.
- What is the difference between the QBI threshold and the phase-in range amount?
- They are two separate columns in the same table. The threshold amount is set under § 199A(e); the phase-in range amount is set under § 199A(b) and § 199A(d). For every filing status Rev. Proc. 2024-40 lists, the phase-in range amount is the larger of the two, so the range amount marks the far end of the band that opens at the threshold rather than a second, competing cut-off.
- Does Rev. Proc. 2024-40 set the QBI deduction percentage?
- No. The qualified business income item sets only the threshold amounts under § 199A(e) and the phase-in range amounts under § 199A(b) and § 199A(d) for taxable years beginning in 2025. The deduction percentage, the wage and property limits, and the treatment of a specified service trade or business are all in § 199A itself, and this revenue procedure does not restate any of them.
- Which tax year does the $394,600 QBI threshold apply to?
- Rev. Proc. 2024-40 states the qualified business income amounts for taxable years beginning in 2025, and the general rule in the procedure's effective date section applies the revenue procedure to taxable years beginning in 2025. Qualified business income is not one of the items routed to the calendar year rule instead, so the figure follows the taxpayer's taxable year rather than the calendar year.
- Where do the QBI threshold amounts come from?
- They are the threshold amounts in § 199A(e) of the Internal Revenue Code, as adjusted for inflation. Rev. Proc. 2024-40 publishes the adjusted figures for 2025 in its qualified business income item, and the procedure says the inflation-adjusted items it sets out are generally determined by reference to § 1(f). The IRS is applying the statute's indexing rule rather than selecting a new number each year.
Every amount on this page is a published figure rather than yours. The QBI deduction on any other return takes the number you enter and works it out against them, showing which published figure it used.
Above the threshold, the wage and property limits phase in
For 2025, if your taxable income before the QBI deduction exceeds the threshold ($394,600 for married filing jointly, $197,300 for all other returns), the wage and property limits may reduce your QBI. The reduction doesn't apply all at once. Instead, it phases in gradually over a range above the threshold. For joint filers, the phase-in range runs from $394,600 to $494,600. For single filers and all other returns, it runs from $197,300 to $247,300. Within this range, only a portion of the wage and property limit applies, determined by how far your income exceeds the threshold relative to the phase-in range width. Once your taxable income surpasses the top of the range ($494,600 joint, $247,300 single), the full reduction applies. Below the threshold, no reduction is required regardless of wages or property.
Above the threshold but below the phase-in range (more than $394,600 and $494,600 if married filing jointly, and $197,300 and $247,300 for all other returns), the reduction is phased in; or • Above the threshold and phase-in range, the full reduction applies.
2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
What the reduction is measured against
For 2025, when taxable income before the QBI deduction exceeds the threshold ($394,600 for married filing jointly, $197,300 for all other returns), your qualified business income from each trade or business may be partially or fully reduced. The reduction is measured against a wage and property limit. This limit equals the greater of two amounts: 50% of the 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. The reduction phases in gradually above the threshold. For joint filers, the phase-in range runs from $394,600 to $494,600. For single filers, it runs from $197,300 to $247,300. Below the threshold, no reduction applies regardless of wages or property. Once taxable income exceeds the top of the range, the full wage and property limit applies to reduce QBI.
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
2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Specified service businesses above the range
The threshold is $394,600 for married filing jointly and $197,300 for all other returns. The phase-in range ends at $494,600 for joint filers and $247,300 for single filers. This means that once taxable income exceeds these phase-in range tops, no qualified business income, wages, or UBIA of qualified property from the SSTB can be included in the QBI deduction calculation. The SSTB is completely excluded from the deduction. Below the threshold, SSTBs are treated the same as other qualified trades or businesses and can generate income eligible for the deduction. Between the threshold and the top of the phase-in range, a partial reduction applies to SSTB income.
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
2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
The deduction is also capped by taxable income
For 2025, the QBI deduction is limited to the lesser of your QBI component plus qualified REIT and PTP income, or 20% of your taxable income calculated before the QBI deduction, minus your net capital gain. This means that even if your qualified business income and other components would generate a larger deduction, the final amount cannot exceed 20% of taxable income minus net capital gain. Net capital gain includes qualified dividends. This overall limitation applies regardless of your income level and works alongside the wage and property limits that apply above the threshold of $394,600 for married filing jointly and $197,300 for all other returns. The phase-in range for these limits runs up to $494,600 for joint filers and $247,300 for single filers.
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
2025 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 the qualified business income deduction, that grouping is essentially locked in. You must report the same aggregation on Schedule B (Form 8995-A) every year going forward, and you cannot drop businesses from the group once they are in it, though you may add additional trades or businesses if the requirements are still met. The only way to change an existing aggregation is if a significant change in facts and circumstances occurs that disqualifies the grouping. This consistency rule applies to the 2025 tax year and all future years in which you claim the deduction under federal law. Schedule B must be completed annually to show the current aggregation, including any aggregation of a related pass-through entity in which you hold a direct or indirect interest. Failure to disclose aggregated trades or businesses on the form may cause the IRS to disaggregate them.
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.
2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Crossing the threshold changes which form you must file
Individuals and eligible estates and trusts use Form 8995-A to figure the qualified business income deduction if their 2025 taxable income before the QBI deduction is more than $394,600 for married filing jointly or $197,300 for all other returns. If your taxable income is at or below those amounts and you are not a patron in a specified agricultural or horticultural cooperative, you do not file Form 8995-A. Instead, you use Form 8995, Qualified Business Income Deduction Simplified Computation, which is a shorter form that does not require the detailed business-by-business breakdown, the wage and property limitation calculations, or the aggregation and specified service trade or business schedules that Form 8995-A demands. S corporations and partnerships themselves are never eligible for the deduction and do not file either form; they pass the necessary information through to their shareholders or partners on Schedule K-1. The threshold amounts are adjusted annually for inflation, so check the current year's instructions before deciding which form applies to your situation.
Otherwise, use Form 8995, Qualified Business Income Deduction Simplified Computation, to figure your QBI deduction.
2025 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 a taxpayer's total qualified business income from all trades or businesses produces a net loss, the loss is not simply forgotten. The net loss is carried forward and reported in the next tax year on Schedule C (Form 8995-A), line 2, or Form 8995, line 3, under "Qualified business net (loss) carryforward from prior years." The carryforward amount then automatically offsets qualified business income in later years, whether or not the taxpayer separately reports it on the return, and it applies regardless of whether the trade or business that originally generated the loss still exists. This carryforward rule operates purely for purposes of the qualified business income deduction; it does not change how the loss is treated under other provisions of the Internal Revenue Code. In addition, if the taxpayer has an overall qualified business net loss carryforward for the year, no qualified business income deduction is allowed in that year unless the taxpayer also has qualified REIT dividends or qualified PTP income.
The amount reported on this line must be reported in the next tax year on Schedule C (Form 8995-A), line 2, or Form 8995, line 3, Qualified business net (loss) carryforward from prior years, as applicable. 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.
2025 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 computing qualified business income for 2025, the taxpayer must include all items attributable to the trade or business, which expressly includes the deductible part of self-employment tax, the self-employment health insurance deduction, and contributions to qualified retirement plans. These amounts are reductions to qualified business income even though the taxpayer claims them elsewhere on the federal return - typically on Schedule 1 of Form 1040 - rather than inside the qualified business income computation itself. In other words, the deduction you already take above the line for self-employment tax, for health insurance, or for retirement contributions is mirrored here by lowering the qualified business income base. The qualified business income figure therefore ends up smaller than it would be if those deductions were ignored. This is an important sequencing point: those above-the-line deductions shrink the amount that feeds into the qualified business income deduction, not the deduction itself. Items that are not properly includible in income, wage income, amounts received as reasonable compensation from an S corporation, and guaranteed payments are excluded from qualified business income entirely and are discussed separately.
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.
2025 Instructions for Form 8995-A, Deduction for Qualified Business Income (IRS)
Your own S corporation salary or partnership guaranteed payment is not QBI
The IRS list of items that are excluded from qualified business income specifically names amounts received as reasonable compensation from an S corporation. This means that the salary an S corporation shareholder-employee draws from the business, which is reported on Form W-2 and subject to withholding, is treated as wage income and is not part of the qualified business income that feeds into the qualified business income deduction. Similarly, guaranteed payments made to a partner for services or the use of capital, and payments made to a partner for services other than in a partner capacity under section 707(a), are also excluded from qualified business income. The policy behind these exclusions is to prevent the same economic activity from generating a deduction both as wages or guaranteed payments subject to employment taxes and as qualified business income. As a result, an S corporation shareholder must take a reasonable salary - which reduces the corporation's pass-through income - before any remaining qualified business income can be calculated, and a partner receiving a guaranteed payment must exclude that amount from the qualified business income base entirely.
QBI doesn’t include any of the following. • Items that aren’t properly includible in income. • Income that isn’t effectively connected with the conduct of a trade or business within the United States (go to IRS.gov/ECI). • Wage income (except “Statutory Employees” where Form W-2, box 13, is checked). • 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.
2025 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. 2024-40 (IRS)
- Threshold, joint filers
Filing Status Threshold amount Phase-in range amount Married Individuals Filing Joint Returns $394,600 $494,600
- Threshold, single filers
Filing Status Threshold amount Phase-in range amount Married Individuals Filing Joint Returns $394,600 $494,600 Married Individuals Filing Separate Returns $197,300 $247,300 All Other Returns $197,300 $247,300
- Phase-in range top, joint filers
Filing Status Threshold amount Phase-in range amount Married Individuals Filing Joint Returns $394,600 $494,600
- Phase-in range top, single filers
Filing Status Threshold amount Phase-in range amount Married Individuals Filing Joint Returns $394,600 $494,600 Married Individuals Filing Separate Returns $197,300 $247,300 All Other Returns $197,300 $247,300
- Threshold, married filing separately
Married Individuals Filing Separate Returns $197,300 $247,300
- Phase-in range top, married filing separately
Married Individuals Filing Separate Returns $197,300 $247,300
2025 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.