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.