Guides
Form 8995: The Qualified Business Income (QBI) Deduction
Form 8995 is the one-page IRS form that pass-through owners use to claim the qualified business income (QBI) deduction, worth up to 20% of their business income under Internal Revenue Code Section 199A. You file Form 8995 when your taxable income is at or below the annual threshold. Above it, you switch to the longer Form 8995-A, where wage and property limits and special rules for service businesses can shrink or eliminate the deduction.
Sole proprietors, partners, S corporation shareholders, and many trust and estate beneficiaries all may qualify. The deduction reduces taxable income, not adjusted gross income, and you can claim it whether you take the standard deduction or itemize.
What the QBI deduction does
The QBI deduction lets eligible owners of pass-through businesses deduct up to 20% of their qualified business income, plus 20% of qualified REIT dividends and publicly traded partnership income. It is a below-the-line deduction that lowers taxable income for the year, capped overall at 20% of taxable income minus net capital gains.
Qualified business income means the net income from a U.S. trade or business operated as a sole proprietorship, partnership, S corporation, or certain LLCs, trusts, and estates. It excludes wages, guaranteed payments to partners, most capital gains and losses, dividends, and interest income that is not tied to the business. Partners and S corporation shareholders find their QBI figures reported on their Schedule K-1.
The deduction was created by the 2017 Tax Cuts and Jobs Act and had been set to expire after 2025. The One Big Beautiful Bill Act (OBBBA, Section 70105) made it permanent, so it continues for 2026 and beyond with no scheduled sunset. For the statute-level view of the wage and property limits, see our Section 199A QBI deduction guide.
Form 8995 vs Form 8995-A: which one you file
You file Form 8995 (the simplified computation) when your taxable income before the QBI deduction is at or below the year’s threshold. You file Form 8995-A when income is above that threshold, or when you have specific complications such as a specified service business phasing out, patron reductions from a cooperative, or aggregated businesses. The threshold, not the type of business, is the trigger.
For 2026, the taxable-income thresholds (before the QBI deduction) are set by Rev. Proc. 2025-32:
| Filing status | Use Form 8995 at or below | Use Form 8995-A above the phase-in top |
|---|---|---|
| Married filing jointly | $403,500 | $553,500 (phase-in $403,500 to $553,500) |
| Married filing separately | $201,775 | $276,775 (phase-in $201,775 to $276,775) |
| Single, head of household, others | $201,750 | $276,750 (phase-in $201,750 to $276,750) |
OBBBA widened the phase-in range starting in 2026. The range over which the wage and property limits (and the service-business cutoff) phase in grew from $50,000 to $75,000 for single filers, and from $100,000 to $150,000 for joint filers. These ranges are indexed for inflation after 2026.
The practical difference: Form 8995 asks for QBI by business, applies the flat 20%, and compares it to the overall 20%-of-taxable-income cap. Form 8995-A adds four parts and up to four schedules to run the W-2 wage limit, the unadjusted basis of qualified property (UBIA) limit, and the service-business reduction.
The 2026 taxable-income thresholds and why they matter
The 2026 thresholds decide whether the deduction is a clean 20% or a limited amount. At or below $403,500 (joint) or $201,750 (single), you get 20% of QBI with no wage or property test, and even a service business qualifies fully. Above the phase-in top, the wage and property limits apply in full, and service-business income drops out entirely.
Below the threshold, the math is straightforward: take 20% of QBI, then confirm it does not exceed 20% of taxable income minus net capital gains. That overall cap is why a large capital gain in the same year can shrink the deduction even when business income is strong.
Inside the phase-in range (for example, $403,500 to $553,500 for joint filers in 2026), the limitations apply proportionally. The IRS instructions for Form 8995-A walk through the ratio, and tax software computes it automatically.
The W-2 wage and UBIA limits (Form 8995-A)
Above the threshold, the deduction for a non-service business is capped at the greater of two amounts: 50% of the business’s W-2 wages, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property (UBIA). The deduction becomes the lesser of 20% of QBI or that wage/property cap.
This is where many higher-income owners lose part of the deduction. A profitable business that pays little in W-2 wages and owns few depreciable assets can hit the cap well below 20% of its income. Sole proprietors with no employees are especially exposed, which sometimes drives a look at an S corporation election on Form 2553 to create W-2 wages, a decision with its own payroll and cost trade-offs.
UBIA is generally the original cost of depreciable tangible property still within its depreciation period, not its depreciated book value. Property counts for the later of 10 years or the end of its depreciation recovery period.
SSTB limits: service businesses above the threshold
A specified service trade or business (SSTB) is one where the principal asset is the reputation or skill of its owners or employees. It includes health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, and investing. Below the income threshold, an SSTB qualifies fully. Above the phase-in top, its QBI, wages, and property are excluded entirely and the deduction is lost.
The carve-out matters because it can create a steep drop for professionals. A married accountant with taxable income of $403,500 in 2026 may claim the full 20%, while the same practice at $553,500 or more gets nothing from Section 199A. Inside the range, the allowed percentage phases down on a straight-line basis.
Architecture and engineering are notably not SSTBs, so those firms face only the wage and property limits, never the full cutoff. The IRS defines each SSTB category in the regulations under Section 199A, and edge cases (for example, businesses with both service and non-service lines) can turn on a de minimis test.
OBBBA permanence and the new $400 minimum deduction
OBBBA Section 70105 made the QBI deduction permanent beginning in 2026, removing the 2025 expiration date. The deduction rate stayed at 20% (a proposed increase to 23% was dropped), the phase-in ranges widened to $75,000 and $150,000, and a new minimum deduction was added.
Starting in 2026, an owner with at least $1,000 of aggregate QBI from one or more active qualified trades or businesses may claim a minimum deduction of $400, even if the ordinary computation would produce less. The $1,000 floor and the $400 amount are indexed for inflation after 2026. This mainly helps very small or part-time active businesses whose 20% figure would otherwise be minimal.
Permanence changes planning: owners no longer need to accelerate income into a pre-sunset year, and the deduction can be treated as a stable feature of pass-through taxation rather than a temporary one.
How to fill out Form 8995
For most eligible filers below the threshold, Form 8995 takes a few lines. You list each business, enter its QBI, total the amounts, apply 20%, add the REIT and PTP component, and compare the result to the overall taxable-income cap.
- Enter each trade or business name and taxpayer identification number on lines 1(i) through 1(v), with the QBI for each.
- Total the QBI on line 2, net any qualified business loss carryforward from the prior year on line 3, and combine on line 4.
- Multiply line 4 by 20% (line 5) to get the QBI component.
- Enter qualified REIT dividends and PTP income on line 6, apply the loss carryforward on line 7, and multiply the total by 20% on line 9.
- Add lines 5 and 9 (line 10), then compare to 20% of taxable income minus net capital gains (lines 11 through 13). The smaller amount is your deduction on line 15, which carries to Form 1040.
If any component is negative, it carries forward to reduce next year’s QBI, which is why a loss year can reduce a later year’s deduction.
FAQ
Who has to file Form 8995 or 8995-A?
Any individual, trust, or estate claiming the qualified business income deduction files one of the two forms. You use Form 8995 if taxable income before the deduction is at or below the 2026 threshold ($201,750 single, $403,500 joint) and you are not a patron with cooperative reductions. Everyone else claiming QBI uses Form 8995-A.
What is the difference between Form 8995 and Form 8995-A?
Form 8995 is a one-page simplified computation for taxpayers under the income threshold, applying a flat 20% to QBI. Form 8995-A is the longer version with four parts and schedules that apply the W-2 wage limit, the UBIA property limit, and the specified service business reduction for taxpayers above the threshold or inside the phase-in range.
Is the QBI deduction still available in 2026?
Yes. The One Big Beautiful Bill Act (Section 70105) made the Section 199A QBI deduction permanent starting in 2026, with no scheduled expiration. The rate remains 20%, the phase-in ranges widened to $75,000 (single) and $150,000 (joint), and a new $400 minimum deduction applies to active owners with at least $1,000 of QBI.
Can a doctor or lawyer claim the QBI deduction?
Yes, but only up to the income threshold. Health, law, accounting, consulting, and similar specified service trades or businesses (SSTBs) qualify fully when 2026 taxable income is at or below $403,500 (joint) or $201,750 (single). Above the phase-in top ($553,500 joint), an SSTB loses the deduction entirely. Inside the range, it phases out proportionally.
Does the QBI deduction reduce my self-employment tax?
No. The QBI deduction reduces your income tax by lowering taxable income, but it does not reduce self-employment tax, which is calculated on net earnings before the deduction. A sole proprietor still owes the full self-employment tax on business profit regardless of any QBI deduction claimed.
Can I take the QBI deduction with the standard deduction?
Yes. The QBI deduction is separate from the choice between standard and itemized deductions. You can claim it whether you take the standard deduction or itemize, because it is subtracted after that choice and reduces taxable income directly rather than being an itemized deduction.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.