What is the Difference Between Form 8995 and 8995-A?
Form 8995 and Form 8995-A are both used to calculate the Qualified Business Income (QBI) deduction, but they serve different purposes and are used by different taxpayers.
Form 8995: Simplified Computation
- Used by individual taxpayers and some trusts and estates to figure the QBI deduction using a simplified method.
- Applies to taxpayers who do not need to complete detailed calculations or who have simpler business income situations.
- Allows a deduction of up to 20% of net QBI from a trade or business, including income from pass-through entities (but not C corporations), plus 20% of qualified REIT dividends and qualified PTP income.
- For Electing Small Business Trusts (ESBT), the S corporation portion must use Form 8995 separately and attach it to the ESBT tax worksheet with “ESBT” noted in the top margin.
Form 8995-A: Detailed Computation
- Used for more detailed calculations of the QBI deduction, especially when taxpayers have complex business operations or need to account for specified service trades or businesses (SSTBs).
- Includes multiple schedules for specific computations:
- Schedule A: Specified Service Trades or Businesses
- Schedule B: Aggregation of Business Operations
- Schedule C: Loss Netting and Carryforward
- Schedule D: Special Rules for Patrons of Cooperatives
- Required for taxpayers whose taxable income before the QBI deduction exceeds $394,600 (married filing jointly) or $197,300 (all other filing statuses).
- Also used by patrons in specified agricultural or horticultural cooperatives.
Key Differences
- Purpose: Form 8995 is for simplified computation; Form 8995-A is for detailed, itemized computation.
- Eligibility: S corporations and partnerships do not file Form 8995-A; they pass through information via Schedule K-1.
- Complexity: Form 8995-A includes multiple schedules for detailed analysis, while Form 8995 is streamlined.
- Income Thresholds: Form 8995-A is typically used when income exceeds certain thresholds, triggering phase-out rules.
Source:
Form 8995 Instructions
Form 8995-A Instructions
Disclaimer: Always verify with the official Federal or State Department of Revenue Forms and Instructions for the most accurate and up-to-date tax guidance.