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What are the QBI Phase Out amounts?

Understanding the Phase Out Thresholds for Qualified Business Income Deduction

BS

Business Tax Specialist

Tax Expert

3 min read
Published on 4 months ago
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The Qualified Business Income (QBI) deduction phase-out amounts for 2025 are based on taxable income thresholds and apply to individuals whose income exceeds the specified limits. The phase-out begins at the threshold amount and fully phases out at a higher income level, depending on filing status.

Phase-Out Thresholds for 2025

  • Married Filing Jointly:
    • Threshold: $394,600 (below this, no phase-out)
    • Phase-in range: $394,601 to $494,600 (partial phase-out applies)
    • Above $494,600: Full phase-out applies
  • All Other Filing Statuses (Single, Head of Household, Married Filing Separately):
    • Threshold: $197,300 (below this, no phase-out)
    • Phase-in range: $197,301 to $247,300 (partial phase-out applies)
    • Above $247,300: Full phase-out applies

How the Phase-Out Works

When taxable income exceeds the threshold, the QBI deduction is reduced based on the greater of two calculations for each qualified trade or business:

  • 50% of W-2 wages paid by the qualified trade or business
  • 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property

Within the phase-in range, the reduction is applied proportionally based on how much income exceeds the threshold. Above the phase-in range, the full reduction applies.

Specified Service Trade or Businesses (SSTBs)

SSTBs are generally excluded from QBI if taxable income exceeds the threshold plus the phase-in range. However, if income is within the phase-in range, a partial QBI deduction may still be available by completing Schedule A (Form 8995-A).

Source:

Form 8995-A Instructions (2025)

Disclaimer: Always verify with current IRS forms and instructions from the Federal or State Department of Revenue. Tax rules may vary based on individual circumstances and jurisdiction.

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Key Takeaways

  • Understanding tax deductions can significantly reduce your tax liability
  • Keep detailed records of all tax-related expenses and documents
  • Consult with a tax professional for complex situations

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