QBI Income Thresholds and Phaseouts 2026: §199A Limits by Filing Status

Your QBI deduction does not behave the same way at every income level. Below a cutoff it is close to a flat 20% and most of the complicated rules sit dormant. Above it, the W-2 wage limit, the property limit, and the specified service rules all wake up, and your deduction can shrink or vanish. The cutoff is your taxable income, and it moves with your filing status. Here are the 2026 numbers and what actually changes in each zone.

What Are the QBI Income Thresholds?

The §199A deduction has two taxable income thresholds for each filing status. The lower one is where the limits start to phase in. The upper one is where they apply in full. Between the two is a transition range. The figures are adjusted for inflation every year, and the 2026 amounts come from Rev. Proc. 2025-32.

2026 QBI Threshold Table by Filing Status

These are taxable income figures, not revenue and not profit. A business can bring in far more than the threshold and still land under it once deductions come out.

What Taxable Income Means for QBI

The threshold is measured against your taxable income figured before the QBI deduction itself. You start with all your income, subtract your above-the-line adjustments, then subtract either the standard deduction or your itemized deductions. For 2026 the standard deduction is $32,200 for married filing jointly and $16,100 for single filers.

That gap between revenue and taxable income is why the threshold catches fewer people than it looks. A married couple with $480,000 of Schedule C profit ends up with taxable income around $430,000 once the deductible half of self-employment tax and the standard deduction come out. The $403,500 line is drawn on that $430,000, not on the $480,000.

Below Threshold vs Phaseout Range vs Above Upper Threshold

There are three zones, and your deduction is calculated differently in each.

Below the lower threshold. The simple zone. You take 20% of your qualified business income, capped only by 20% of taxable income minus net capital gain. SSTB status does not matter here, and the W-2 wage and UBIA limits do not apply. A consultant and a manufacturer with the same income get the same treatment.

Inside the phaseout range. The transition zone. The W-2 wage and UBIA limits phase in proportionally, and for a specified service business the deduction itself phases out proportionally. Part of the deduction survives, and how much depends on how far into the range you sit.

Above the upper threshold. The full-rules zone. The W-2 wage and UBIA limits apply at 100%. A non-SSTB can still claim a deduction if it has enough wages or qualified property to support one. A specified service business gets nothing.

How SSTB Phaseouts Work

A specified service trade or business is one whose product is essentially the skill or reputation of the people running it: health, law, accounting, consulting, financial services, and a handful of others. Below the lower threshold the SSTB label is irrelevant. Inside the range the deduction is cut in proportion to how far up you are. Above the upper threshold an SSTB has no qualified business income left, so the deduction is zero. A non-SSTB never hits that wall. We go deep on which side of the line your business sits in the SSTB vs non-SSTB guide.

How W-2 Wage and UBIA Limits Phase In

For a non-SSTB above the lower threshold, the deduction is capped at the greater of two tests: 50% of the business’s W-2 wages, or 25% of W-2 wages plus 2.5% of UBIA (the unadjusted basis of qualified property). Inside the phaseout range only part of that cap applies. Above the upper threshold the full cap bites. This is why a high-profit business with no payroll and no property can lose most of its deduction at high income, while a capital-heavy or wage-heavy business keeps it. The mechanics are worked through in the W-2 wage and UBIA limit guide.

Why MFS Is Not Exactly Half of MFJ in 2026

The §199A threshold for married filing separately is set at half the married filing jointly amount. Half of $403,500 is $201,750, which is also the single and head of household number. The separate figure is $201,775, twenty-five dollars higher, because each threshold is rounded on its own under the inflation rounding rules in Rev. Proc. 2025-32. It is a rounding artifact, not a different policy, and the same $25 gap shows up at the top of the range ($276,775 versus $276,750).

How the 2026 $400 Minimum Deduction Fits In

The One Big Beautiful Bill Act added a minimum QBI deduction starting in 2026. If you actively run a qualified trade or business with at least $1,000 of QBI, you get a deduction of at least $400 even when the wage and property limits would otherwise drop it to near zero. The floor is a backstop for active owners. It does not rescue a passive activity, and it does nothing for a fully phased-out specified service business, because that business has no qualified business income for the floor to attach to.

Examples by Filing Status

The four cases below are all married filing jointly so the threshold stays fixed at $403,500 to $553,500. Single, head of household, and separate filers work the same way against their own numbers from the table. Every figure here is computed by the calculator engine.

Example 1. Below the threshold, SSTB still gets QBI. A married consultant (a specified service business) with $300,000 of profit and no employees. Taxable income before QBI lands near $252,000, below $403,500, so the SSTB rule never fires. The deduction is $50,469, the full 20% result.

Example 2. Inside the phaseout range, partial deduction. The same consultant at higher income, no employees, so no W-2 wages to lean on. As taxable income moves up through the band, the deduction falls:

Nothing about the business changed across those rows. The deduction shrinks purely because taxable income is climbing through the phaseout range.

Example 3. Above the upper threshold, SSTB at zero. The same consultant with $1,000,000 of profit. Taxable income is well past $553,500, the SSTB deduction is fully phased out, and the result is $0.

Example 4. High-income non-SSTB with no wages or property. A non-service business with $1,000,000 of profit, no employees, no qualified property, filing jointly. The wage and UBIA limits apply in full and would normally crush the deduction. Because the owner actively runs the business, the 2026 $400 minimum applies, so the deduction is $400 rather than nothing.

How to Test Phaseouts in the Calculator

Open the QBI Entity Selection Calculator, set your filing status, and enter your income. Watch the Total QBI deduction row as you raise the income past the threshold for your status. You will see it hold at the full 20%, then bend down through the phaseout range, then settle into the wage-limited result above the top. Flip the Specified Service Trade or Business toggle to Yes and the same income can drop the deduction to zero once you are above the upper threshold. For the deduction explained end to end, start with our 2026 §199A QBI deduction guide.

Frequently Asked Questions

What is the QBI income limit for 2026? It depends on filing status. The phaseout starts at $403,500 for married filing jointly and $201,750 for single and head of household filers. The limits apply in full above $553,500 (joint) and $276,750 (single).

What is the QBI phaseout for married filing jointly? The 2026 phaseout range runs from $403,500 to $553,500 of taxable income. Below it the deduction is unrestricted, inside it the limits phase in, and above it they apply in full.

What is the QBI phaseout for married filing separately? From $201,775 to $276,775 of taxable income in 2026.

Why is MFS $201,775 instead of $201,750? Rounding. The separate threshold is half the joint amount, and each figure is rounded on its own under Rev. Proc. 2025-32, which leaves the separate number $25 above the single number.

When does SSTB QBI become zero? Above the upper threshold, which is $553,500 for joint filers and $276,750 for single filers in 2026. At that point a specified service business has no qualified business income and gets no deduction.

Do W-2 wages matter below the threshold? No. Below the lower threshold the wage and UBIA limits do not apply, so a business with no employees still gets the full 20%. Wages only start to matter inside and above the phaseout range.

Does the $400 minimum apply above the threshold? Yes, for an active non-SSTB business with at least $1,000 of QBI, even when the wage and property limits would otherwise leave almost nothing. It does not help a passive activity or a fully phased-out specified service business.

Sources

• IRS, Qualified Business Income Deduction
• IRS, About Form 8995-A and instructions
• Rev. Proc. 2025-32, 2026 inflation adjustments

This content is for educational purposes only. It is not legal or tax advice. Consult a qualified tax professional before making decisions about your business or filing.