I have a Partnership / S-Corporation K-1 with income entered, but there is no QBI calculating on my return
If you received a Partnership (Form 1065) or S-Corporation (Form 1120-S) K-1 with income reported but no Qualified Business Income (QBI) deduction is being calculated on your Form 1040, this is likely because the QBI deduction is not automatically computed by tax software or forms unless specific conditions are met.
Why QBI May Not Be Calculated
- Income Thresholds Not Met: The QBI deduction is only available if your taxable income before the deduction is $197,300 or less (or $394,600 if married filing jointly). If your income exceeds these thresholds, the deduction may be phased out or eliminated.
- Not All Income Qualifies: The K-1 may report income that includes items not eligible for QBI, such as capital gains, investment income, or items not included in taxable income. Only qualified items of income, gain, deduction, and loss included in taxable income count toward QBI.
- Specified Service Trade or Business (SSTB): If your business is classified as an SSTB (e.g., law, accounting, financial services), the QBI deduction may be limited or disallowed based on income level and business type.
- Patron in a Specified Cooperative: If you are a patron in a specified agricultural or horticultural cooperative, you may not qualify for the QBI deduction.
How to Calculate QBI Deduction Manually
You must use one of two IRS forms to calculate your QBI deduction:
- Form 8995 – Use this if your taxable income before the QBI deduction is ≤ $197,300 (single) or ≤ $394,600 (married filing jointly), and you meet all eligibility requirements.
- Form 8995-A – Use this if you do not meet all the requirements for Form 8995, including higher income levels or complex business structures.
The K-1 provides information such as your distributive share of QBI, W-2 wages allocable to qualified payments, and other relevant data. You must use this information to complete the appropriate form.
Important Notes
- QBI deduction is up to 20% of net qualified business income plus 20% of qualified REIT dividends and qualified publicly traded partnership (PTP) income.
- The K-1 may report items that are not includible in your QBI calculation. You must exclude non-qualified items when computing your deduction.
- For trusts and estates, the same rules apply using Form 8995 or Form 8995-A based on the beneficiary’s share of income.
Source:
Schedule K-1 (1065).pdf
Schedule K-1 (1120-S).pdf
Disclaimer: Always verify with the current Federal or State Department of Revenue Forms and Instructions for the most accurate and up-to-date tax guidance.