8995: Qualified Business Income Deduction Simplified Computation (2024)
Federal · IRS · Used for tax years 2024
Form 8995 provides a simplified computation of the qualified business income deduction. It reports qualified business income or losses, qualified REIT dividends and publicly traded partnership income or losses, and calculates the deduction and loss carryforwards. Attach it to you
Who files this form
Individuals and eligible estates and trusts use Form 8995 to figure their qualified business income (QBI) deduction when all of these conditions apply:
- They have QBI, qualified real estate investment trust (REIT) dividends, or qualified publicly traded partnership (PTP) income or loss.
- Their 2024 taxable income before the QBI deduction is no more than $383,900 if married filing jointly, or $191,950 for all other returns.
- They are not a patron in a specified agricultural or horticultural cooperative.
Otherwise, the instructions direct taxpayers to use Form 8995-A to figure the deduction.
S corporations and partnerships cannot claim the deduction themselves. They must pass the necessary information to shareholders or partners on an attachment to Schedule K-1. Cooperatives also cannot claim this QBI deduction.
What you'll need
Have the following information and records available, as applicable:
- Your tax return, including taxable income before the QBI deduction, qualified dividends, and net capital gain. You may also need Schedule D to determine net capital gain.
- Each business's name, taxpayer identification number, and qualified business income or loss.
- Schedule K-1 and its QBI information attachments for income from a partnership, S corporation, estate, or trust.
- Form 1099-DIV for qualified REIT dividends, reported on line 5.
- Records of prior-year qualified business losses and REIT/PTP loss carryforwards, plus records tracking suspended losses or deductions.
If you aggregated businesses, attach Schedule B (Form 8995-A) or a similar schedule. If you have more than five businesses, attach a statement listing the additional businesses' names and taxpayer identification numbers, and include their income or loss in line 2.
How to file
Attach Form 8995 to your tax return. Also enter the deduction from line 15 on the applicable line of your return. For Form 1040 and Form 1040-SR, use line 13. For Form 1040-NR, use line 13a.
An electing small business trust (ESBT) must calculate the deduction separately for its S and non-S portions. Attach the S portion's Form 8995 as a PDF to the ESBT tax worksheet filed with Form 1041, and write “ESBT” in the form's top margin to identify it as applying only to the S portion.
Instructions and the latest information are available at IRS.gov/Form8995.
Common mistakes
- Automatically treating Schedule K-1 or Schedule C amounts as QBI. The instructions warn that these amounts are not automatically included. Check whether each item qualifies and how it is treated on your federal income tax return.
- Including suspended losses on line 1. Do not include losses still suspended from use in calculating current-year taxable income. Qualified portions of previously suspended business losses that are now allowed belong on line 3, not line 1.
- Leaving out an aggregation attachment. If you aggregated businesses, you must attach Schedule B (Form 8995-A) or a similar schedule.
- Losing track of suspended losses. Track qualified and nonqualified losses separately until they are no longer suspended.
Questions people ask
How much is the QBI deduction?
It can be up to 20% of net QBI, plus 20% of qualified REIT dividends and qualified PTP income. The total cannot exceed 20% of taxable income before the QBI deduction, reduced by net capital gain and qualified dividends. Form 8995, line 15, uses the smaller of the calculated deduction and the income limit.
Do employee wages count as QBI?
Generally, no. Amounts in Form W-2, box 1, are not QBI unless the “Statutory Employee” box in box 13 is checked.
Can rental real estate qualify?
Yes, if it qualifies as a trade or business. The instructions also describe a rental real estate safe harbor under Revenue Procedure 2019-38. A rental activity that does not meet the safe harbor may still qualify as a section 162 trade or business.
What if I have a qualified business net loss?
You do not qualify for the QBI deduction for that year unless you have qualified REIT dividends or qualified PTP income. The business loss carries forward to the next year. This carryforward does not affect whether the loss is deductible under other tax rules.