Why isn't my K-1 income being used to calculate the Qualified Business Income (QBI) on Form 8995?

If your Schedule K-1 income isn't being included on Form 8995, it doesn't necessarily mean there's a problem with your return. Not all income reported on a Schedule K-1 qualifies for the Qualified Business Income (QBI) Deduction.

Only amounts specifically identified as Qualified Business Income (QBI) under Section 199A are used when calculating the deduction. Simply receiving income from a partnership, S corporation, trust, or estate does not automatically make that income eligible.

How Is QBI Reported on a Schedule K-1?

To determine whether your K-1 includes qualified business income, review the Section 199A information reported on the form. The QBI deduction calculation uses only the amounts specifically provided for Section 199A purposes.

Depending on the type of Schedule K-1 you received, look for the following entries:

Form 1065 (Partnership K-1)

Qualified Business Income information is typically reported in:
  • Box 20, Code Z
Additional Section 199A details may be included in supplemental statements attached to the K-1.

Form 1120-S (S Corporation K-1)

Qualified Business Income information is typically reported in:
  • Box 17, Code V
Any required Section 199A information may also be provided on a separate attachment.

Form 1041 (Trust or Estate K-1)

Look for entries identified as:
  • Qualified Business Income (Section 199A)

Why Might My K-1 Income Not Qualify for QBI?

There are several reasons why amounts reported on your K-1 may not be included in the QBI calculation:
  • The income is not considered qualified business income under Section 199A.
  • The K-1 does not contain any Section 199A information.
  • The income is investment-related rather than business-related.
  • The partnership, S corporation, trust, or estate did not report QBI to you.
  • Required Section 199A statements were not entered when preparing your return.
In many cases, the K-1 reports ordinary income, guaranteed payments, investment income, capital gains, or other items that are not eligible for the QBI deduction.

How Do I Enter QBI Information From My K-1?

When entering your Schedule K-1, be sure to enter all Section 199A information exactly as provided on the K-1 and any attached statements.

The program uses this information to determine:

  • Whether the income qualifies for the QBI deduction
  • The amount of qualified business income
  • Any qualified REIT dividends
  • Any qualified publicly traded partnership (PTP) income
  • Whether Form 8995 or Form 8995-A is required
If the Section 199A information is not entered, your QBI deduction may be reduced or may not calculate at all.

How Can I Verify the QBI Calculation?

After entering your K-1 information, you can review your return PDF to see whether Form 8995 or Form 8995-A was generated.

To view the form:

  1. Select Review/Summary from the sidebar menu.
  2. View Return or Print to access return PDF (or Show Details to provide payment information to view return)
  3. Review Form 8995 or Form 8995-A for the QBI calculation details. 
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