Can I Take the QBI Deduction Without Itemizing Deductions?
Yes, you are not required to itemize your deductions to claim the Qualified Business Income (QBI) deduction. The QBI deduction is a separate deduction available to eligible individuals, trusts, and estates and does not depend on whether you choose to itemize or take the standard deduction.
Who Is Eligible for the QBI Deduction?
Individuals, eligible estates, and trusts may claim the QBI deduction if they have:
- Qualified Business Income (QBI)
- Qualified REIT dividends (also known as section 199A dividends)
- Qualified Publicly Traded Partnership (PTP) income
The deduction is generally up to 20% of your net QBI, plus 20% of qualified REIT dividends and qualified PTP income. However, the total deduction is limited to 20% of your taxable income (calculated before the QBI deduction), minus net capital gain (increased by any qualified dividends).
When to Use Form 8995 vs. Form 8995-A
Depending on your taxable income, you may use either Form 8995 or Form 8995-A to calculate your QBI deduction:
- Use Form 8995 if your taxable income before the QBI deduction is $197,300 or less (if single, married filing separately, head of household, qualifying surviving spouse, or trust/estate) or $394,600 or less (if married filing jointly).
- Use Form 8995-A if your taxable income exceeds these thresholds or if you are a patron in a specified agricultural or horticultural cooperative.
How to Claim the QBI Deduction in OLT (Online Taxes) Software
To claim the QBI deduction using OLT (Online Taxes) software:
- Click on the Federal option from the left-hand menu.
- Select Deductions.
- Click on Show More next to Qualified Business Income Deduction - Form 8995 / 8995-A.
- Select the business income you want to consider for the QBI deduction.
Ensure that K-1 income entries include QBI-related codes in the Other Information section so the income is properly pulled into the calculation.
Important Notes
- The QBI deduction is not affected by whether you itemize deductions or take the standard deduction.
- Only items included in taxable income (after adjustments) are considered for QBI. Items disallowed under basis, at-risk, passive loss, or excess business loss rules are not included until they are included in taxable income.
- Do not include amounts deducted under IRC 224 for qualified tips in QBI calculations.
Source:
Form 8995 - Qualified Business Income Deduction Simplified Computation
Form 8995-A - Qualified Business Income Deduction
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.