Updated October 1, 2026. Quick answer: For tax year 2026 the qualified business income (QBI) deduction thresholds are $403,500 for married couples filing jointly and $201,750 for all other returns, except $201,775 for married filing separately. Revenue Procedure 2025-32 sets them. Below the threshold the 20% deduction faces fewer limits.
Read box by box from the IRS form text: Form 1099-PATR boxes 6 to 9 and Form 1099-PATR boxes 10 to 13.
Schedule C and Schedule SE (Form 1040) for 2025, read line by line: Schedule C lines 8 and 9 and Schedule C lines 12 and 13.
Related reading on this site: Form 8995-A QBI deduction.
Schedule 1 (Form 1040) for 2025, read line by line: Schedule 1 lines 15 and 16.
Form 1040 for 2025, lines 12 to 38 read line by line: Form 1040 line 13 and Form 1040 lines 14 and 15.
More IRS forms and schedules, read line by line: Form 1065 instructions and Form 8990 instructions.
The IRS form or worksheet behind this, read line by line: Form 8995 instructions.
2026 thresholds and phase-in ranges
| Filing status | Threshold amount | Top of the phase-in range |
|---|---|---|
| Married filing jointly | $403,500 | $553,500 |
| Married filing separately | $201,775 | $276,775 |
| All other returns | $201,750 | $276,750 |
Revenue Procedure 2025-32, in its qualified business income item, says “For taxable years beginning in 2026, the threshold amounts under § 199A(e)(2) and phase-in range amounts under § 199A(b)(3)(B) and § 199A(d)(3)(A) are:” the amounts above. Notice that married filing separately is $201,775, not $201,750.
How the 20% deduction works
The IRS says “The deduction allows eligible taxpayers to deduct up to 20 percent of their QBI”, and that the QBI component “is subject to limitations, depending on the taxpayer’s taxable income which may include the type of trade or business, the amount of W-2 wages paid by the qualified trade or business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property”. The thresholds above are where those limits begin to apply; the phase-in range is the band over which they are phased in. For joint filers that band is $150,000 wide (computed).
What counts as QBI
The IRS says QBI is “the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business”. It does not include “Wage income” or “Investment items such as capital gains or losses”. The deduction is available “regardless of whether taxpayers itemize deductions on Schedule A or take the standard deduction”.
Common mistakes
- Using $201,750 for a married filing separately return. The separate-return threshold is $201,775.
- Treating wages as qualified business income. The IRS excludes wage income.
- Assuming the deduction ends at the threshold. The limits phase in across the range above it.
- Counting capital gains as QBI. Investment items are excluded.
Related: the 2027 QBI thresholds page, the SEP IRA limit page, the 2026 retirement numbers hub, and the 2026 tax brackets.
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Answer againSources
- IRS Revenue Procedure 2025-32, 2026 inflation adjustments: https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
- IRS, Qualified business income deduction: https://www.irs.gov/newsroom/qualified-business-income-deduction
Sources: the primary documents linked above, read on October 1, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.