QBI deduction thresholds 2027.

What the deduction is

Section 199A gives owners of sole proprietorships, partnerships, S corporations and some trusts a deduction of up to 20 percent of qualified business income. For taxpayers with taxable income at or below the threshold the deduction is the lesser of 20 percent of QBI or 20 percent of taxable income minus net capital gain. Above the threshold, a limit tied to the W-2 wages paid and the unadjusted basis of qualified property begins to apply, and a specified service trade or business, such as health, law or consulting, starts to lose the deduction. These limits phase in across the range between the threshold and the top of the range.

The minimum deduction

A smaller rule helps people with small active businesses. Under section 199A(i), a taxpayer whose aggregate qualified business income from active trades or businesses is at least $1,030 in 2027 gets a minimum deduction of $415. Those are the 2027 amounts in the Revenue Procedure.

In the phase-in range, use the full form

Between the threshold and the top of the range the answer depends on W-2 wages, property basis and whether the business is a specified service trade or business, none of which this page asks for. The tool tells you how far into the range your income sits and the most the deduction could be before those limits, then points you to Form 8995-A. Above the range the limits apply in full.

What changed from 2026

Each threshold rose: joint from $403,500 to $416,600, single and other from $201,750 to $208,300, married filing separately from $201,775 to $208,325. The phase-in ranges are 150,000 and 75,000, as the top-of-range figures show, and the minimum-deduction amounts are $1,030 of QBI and $415. Revenue Procedure 2026-35 does not restate the range as a separate number; it is the difference between the two columns.

Worked example (2027)

A single filer has $150,000 of taxable income before the deduction, of which $10,000 is net capital gain, and $80,000 of QBI. At $150,000 income is under the $208,300 threshold. The deduction is the lesser of 20 percent of $80,000, which is $16,000, and 20 percent of $140,000 ($150,000 minus the $10,000 gain), which is $28,000. So the deduction is $16,000. A joint filer at $500,000 of taxable income is $83,400 past the threshold, which is about 55.6 percent of the way through the $150,000 range, so wage and property limits are partly in effect.

Method

The tool compares your taxable income with the threshold for your filing status. At or below it, the estimate is the lesser of 20 percent of QBI and 20 percent of taxable income minus net capital gain. Within the range it reports how far through the range you are, and above it states that the limits apply in full; in both cases it shows the 20-percent ceiling before the wage and property limits. It does not compute the wage and property limit, the specified-service reduction, the REIT and publicly traded partnership component or loss carryforwards. Figures were read on November 9, 2026.

What this does not cover

• The W-2 wage and unadjusted basis limit, and the specified-service reduction, in the phase-in range.
• REIT dividends, publicly traded partnership income and qualified cooperative dividends.
• Aggregation of businesses and prior-year loss carryforwards.
• State treatment, since most states do not offer a QBI deduction.

Figures read from the sources below on November 9, 2026. Last updated November 9, 2026.

Sources

• IRS Revenue Procedure 2026-35, section 3.28 (qualified business income) (retrieved November 9, 2026)
• IRS Revenue Procedure 2025-32, section 4.26 (the 2026 amount) (retrieved November 9, 2026)
• 26 U.S.C. section 199A (qualified business income), text at Cornell Legal Information Institute (retrieved November 9, 2026)
• IRS news release IR-2026-133, November 5, 2026 (retrieved November 9, 2026)