The Qualified Business Income Deduction (QBI or QBID) is available under the U.S. Tax Code to individuals, partnerships, S corporations, and some trusts and estates that have income from a qualified trade or business.
The Qualified Business Income Deduction section can be found in Schedules C, E and F.
Does this business qualify for the qualified business income deduction?
Eligible entities include:
- Sole proprietorships
- Partnerships
- S corporations
- Some trusts and estates
- LLCs taxed as sole proprietorships, partnerships, or S corporations
Qualified Business Income Adjustment Amount
Any amount entered here will adjust the QBI calculated on your Schedule C/E/F. Adjustments may be required in certain circumstances to ensure that the correct amount of QBI is reported for the deduction.
Possible adjustments include:
- Exclusion of Income from a Specified Service Trade or Business (SSTB)
- Adjustments for Losses
- Capital Investments
- Other Business Deductions or Expenses
For detailed instructions, refer to Form 8995 instructions.
An entry in this section will carry over to line 1 of Form 8995.
W-2 Wages paid
If your business uses wages paid to calculate any QBID limitation (based on income thresholds), adjustments may be necessary. Wages paid can help increase the potential deduction if QBI is limited by the W-2 wages or capital investment tests (i.e., the wage and property limitations).
Unadjusted basis of depreciable assets adjustment amount
The unadjusted basis of depreciable property is the original cost of the property before accounting for any depreciation taken. For the purpose of the QBI deduction, the capital limitation is based on the qualified property used in your business.
When calculating the unadjusted basis, do not include any depreciation deductions already taken. Use the original purchase price or cost basis.
Use Amounts for QBI Deduction (Schedule E)
Rental income is generally considered non-passive only if it comes from an active business. Otherwise, rental income is typically treated as passive and may not qualify for the QBI deduction. However, if substantial services are provided to tenants (such as in a property management business), the rental activity may qualify as an active trade or business, making it eligible for the QBID. This is commonly referred to as a real estate trade or business.