QBI Deduction 2027: Thresholds of $208,300 and $416,600, Official

Every fall, the same two numbers set off a chain reaction through the tax code: the Section 199A qualified business income threshold, and the wider band above it where the deduction starts getting harder to keep. Both got their annual inflation adjustment on November 5, 2026, and for 2027 something new rode along with them for the first time — a brand-new minimum deduction that is also indexed for the first time this cycle. The short answer: in Revenue Procedure 2026-35, section 3.28, the IRS set the 2027 QBI threshold at $208,300 for single filers, $208,325 for married filing separately and $416,600 for married couples filing jointly, up from $201,750 and $403,500 in 2026, and the minimum deduction at $415, with the qualifying gate at $1,030. Our eleven-month projection was exact on every one of those figures.

The statute and the rounding

Section 199A sets its income threshold at a flat statutory figure — 26 U.S.C. § 199A(e)(2)(A) fixes it at “$157,500 (200 percent of such amount in the case of a joint return).” That base amount doesn’t move by itself. Subparagraph (B) is the indexing instruction: for tax years beginning after 2018, the threshold is adjusted using the cost-of-living formula in section 1(f)(3), with “calendar year 2017” substituted for the year that formula would otherwise use. Any increase that results gets rounded under section 1(f)(7) — down to the next lowest multiple of $50, or $25 for a married-filing-separately return. That’s a floor, not a round-to-nearest: an unrounded figure of $208,337 rounds down to $208,300, never up to $208,350.

Sitting above the threshold is a second number that moves in lockstep with it but isn’t indexed on its own: the phase-in range, the band of income over which the wage-and-property limit and the specified-service penalty gradually take hold rather than snapping on all at once. That range was set by the 2025 tax law at a flat $75,000 for single filers and $150,000 for joint filers — a fixed dollar width, not a formula output. So the “end of phase-in” figure quoted throughout this piece is just the threshold plus that fixed band width; the band itself never grows or shrinks from one year to the next. What actually happens inside that band — the wage-and-property test, the specified-service phase-out — is worked out on Form 8995-A, which the IRS requires once taxable income is above the threshold, and none of that doctrine changes here; this site’s Form 8995 line-by-line guide covers the one-page form for filers at or below it. This piece is strictly about which dollar figures anchor it in 2027.

The cost-of-living formula itself runs on a specific twelve-month window: the average of the chained CPI-U for all urban consumers over the twelve months ending August 31 of the prior year. It’s the identical window this site’s 2027 IRS inflation adjustments tracker follows for the federal tax brackets, and the same window behind the 2027 standard deduction projection. The August 2026 reading — the twelfth and final month that window needs — came in at 185.739 on the chained CPI-U index, published by the Bureau of Labor Statistics on September 11, 2026. Once that number lands, the QBI threshold calculation has everything it requires. The IRS published the result on November 5, 2026, in Revenue Procedure 2026-35, and it matched.

Checking the method against 2026

Before trusting any formula to project a number the IRS hasn’t announced yet, it should first reproduce a number the IRS has already announced. For 2026, Revenue Procedure 2025-32, section 4.26, set the QBI threshold at $201,750 for single and other filers, $201,775 for married filing separately, and $403,500 for married filing jointly. Running the same section 1(f)(3) mechanics against the confirmed 2026 window produces an unrounded single figure of $201,790.2 — which rounds down to exactly $201,750, with the MFS figure rounding down to $201,775 and the joint figure landing at 200% of the rounded single number, $403,500. All three match the published revenue procedure. That’s the same mechanism that produced the 2027 figures below, not a different one built to fit a target. The IRS confirmed it on November 5, 2026: the official 2027 threshold is $208,300 for single and other filers, $208,325 for married filing separately and $416,600 for married filing jointly (Rev. Proc. 2026-35, § 3.28), the same numbers this method gave from the August 2026 data.

The new minimum deduction, and why October 2025 matters twice

The 2025 tax law added something Section 199A never had before: a floor under the deduction. Under the new 26 U.S.C. § 199A(i), an “applicable taxpayer” — someone with at least $1,000 of aggregate qualified business income from an active qualified trade or business in which they materially participate, under the material-participation test in section 469(h) — gets a deduction of at least $400, even in a year when 20% of their income would produce less. For 2026, the first year this applies, both the $400 floor and the $1,000 qualifying gate are fixed dollar amounts; they aren’t indexed yet. This site’s Form 8995 line-by-line guide covers where that floor lands on the draft 2026 form itself.

Section 199A(i)(3) is what starts the indexing, and it does so on its own schedule: “in the case of any taxable year beginning after 2026,” the $400 and $1,000 figures adjust using the same cost-of-living formula, with “calendar year 2025” substituted as the base year. That makes 2027 the very first year either number moves from its original, flat dollar amount. The rounding rule is different from the threshold’s, too — instead of the floor-to-the-nearest-$50 rule that governs the income threshold, the statute rounds any increase in the minimum deduction “to the nearest multiple of $5.” Nearest, not down.

That distinction is what puts October 2025’s missing data squarely in the middle of this calculation. The Bureau of Labor Statistics never published a CPI-U reading for that month, because data collection stopped during that year’s government shutdown. Reconstructing the twelve-month window means picking one of two approaches: average the eleven published months, or fill the gap with an imputed estimate. For the minimum deduction, the choice actually changes the answer. Averaging the eleven months produces an unrounded increase of $12.75 over $400 — which rounds to the nearest $5, $15, for a final minimum deduction of $415. Using the imputed October estimate instead produces an unrounded increase of $12.24, which rounds to $10, for a final minimum deduction of $410. The two approaches sit close enough together that a floor-rounding rule, like the one governing the income threshold, would have absorbed the gap the same way it did for the 2027 commuter benefit figure; a nearest-rounding rule doesn’t get that luxury, and here it lands on two different final numbers depending on which side of the rounding line the unrounded figure falls. The IRS settled it: Revenue Procedure 2026-35 averaged the eleven published months and left October 2025 out, so the official minimum deduction is $415. The $410 figure is the October-imputed reading the IRS did not use.

The $1,000 qualifying gate, by contrast, isn’t close to a rounding line either way. The eleven-month average produces an unrounded increase of $31.89, rounding to $30; the imputed approach produces $30.61, which also rounds to $30. Both land on a final qualifying threshold of $1,030. So the October 2025 ambiguity genuinely changed the minimum deduction figure — $415 versus $410 — but left the dollar amount of QBI a taxpayer needs to qualify for it exactly where it would land either way: $1,030 (§ 3.28).

What’s not indexed: the phase-in band width

It’s worth restating plainly, because it’s the kind of detail easy to lose in a page of dollar figures: the $75,000 single and $150,000 joint phase-in band is not part of any inflation formula. It was written into the 2025 tax law as a flat dollar width, and nothing in Section 199A instructs it to move. What moves every year is the threshold underneath it. So the official 2027 end-of-phase-in figures — $283,300 single, $283,325 MFS and $566,600 MFJ (§ 3.28), where the October-imputed reading the IRS did not use would have given $283,050, $283,075 and $566,100 — are just each year’s threshold plus that same fixed $75,000 or $150,000. A reader who sees the end-of-phase-in number grow by roughly $6,550 to $13,100 year over year should read that as the threshold moving, not the band widening. Business owners with a loss year should also know that the deduction is left out of the excess business loss calculation, which has its own 2027 threshold of $264,000 ($528,000 joint) in our excess business loss limit 2027 guide.

What the official numbers mean: three worked examples

The dollar figures land differently depending on where a filer’s income and QBI actually sit. Three short examples show the range.

A sole proprietor comfortably below the threshold. Take a filer, single, with taxable income before the QBI deduction of $150,000 and qualified business income of $100,000. That income sits well under both the confirmed 2026 threshold ($201,750) and the official 2027 threshold ($208,300), so none of the wage, property, or specified-service tests apply in either year. The deduction is 20% of QBI: 20% × $100,000 = $20,000. The overall cap — 20% of taxable income before the deduction — is 20% × $150,000 = $30,000. The deduction is the smaller of the two figures, $20,000, unaffected by the 2027 figures, because this filer never gets near the threshold in the first place.

A freelancer just under the $1,000 minimum-deduction gate. A part-time freelancer nets $900 of active qualified business income for the year — below the $1,000 gate in both 2026 and the official 2027 figure of $1,030. The ordinary 20% math still applies: 20% × $900 = $180. But the new minimum-deduction floor never engages, in either year, because this filer’s QBI never clears the $1,000 (or official $1,030) qualifying gate. The $180 deduction stands on its own.

A freelancer just above the gate. Raise that same freelancer’s active QBI to $1,200 — now above the qualifying gate in both years. The ordinary 20% math produces 20% × $1,200 = $240, which is less than the minimum floor in every year examined here. So the minimum takes over: $400 in 2026, and $415 in 2027, because the IRS used the eleven-month average.

What happens next

The IRS confirmed the 2026 threshold figures in Revenue Procedure 2025-32, section 4.26, and the 2027 figures in Revenue Procedure 2026-35, section 3.28, released November 5, 2026 together with news release IR-2026-133. Watch this site’s IRS 2027 inflation adjustments tracker for the rest of the 2027 numbers, and see the 2027 tax brackets and standard deduction page for how the same August 2026 CPI data fed the rest of next year’s return. For the mechanics of claiming the deduction itself, this site’s Form 8995 line-by-line guide remains the page to start from; the 2026 numbers in it are correct as published, and the 2027 numbers above are now official.

Sources

• 26 U.S.C. § 199A — law.cornell.edu/uscode/text/26/199A
• 26 U.S.C. § 1(f)(3), (7) — law.cornell.edu/uscode/text/26/1
• Rev. Proc. 2026-35, § 3.28 (2027 QBI thresholds, minimum deduction and qualifying gate) — irs.gov/pub/irs-drop/rp-26-35.pdf
• IRS news release IR-2026-133, November 5, 2026 — irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2027-taxpayers-continue-to-benefit-from-the-working-families-tax-cuts
• Rev. Proc. 2025-32, § 4.26 (2026 QBI deduction thresholds) — irs.gov/pub/irs-drop/rp-25-32.pdf
• Bureau of Labor Statistics, Chained CPI-U series SUUR0000SA0 — api.bls.gov/publicAPI/v2/timeseries/data/
• finbarrow, IRS 2027 inflation adjustments tracker — companion page for the shared CPI window