Why is the QBI Deduction Not Being Applied?
If you have entered qualified business income (QBI) and indicated your intent to claim the QBI deduction in the Online Taxes software, but the deduction is not calculating, several key requirements must be met for the deduction to apply.
Key Requirements for QBI Deduction to Calculate
- Business Income Must Exist: You must have actual income from a business. The QBI deduction cannot be applied if there is no business income reported.
- Must Have Taxable Income: Your taxable income (before the QBI deduction) must be greater than $0. If your taxable income is $0, the QBI deduction cannot be calculated.
- Income Thresholds Must Be Met: For 2025, the QBI deduction is automatically calculated using Form 8995 if your taxable income before the deduction is $197,300 or less (single, married filing separately, head of household, qualifying surviving spouse, trust, or estate) or $394,600 or less (married filing jointly). If you exceed these thresholds, you must use Form 8995-A.
- Proper K-1 Entry for Pass-Through Entities: If your business income comes from a K-1 (such as from an S corporation or partnership), ensure that the entries were made in the "Other Information" section using the correct QBI codes (Code V for S corporations, Code Z for partnerships). Without this, the software may not recognize the income for QBI purposes.
- Not a Patron in Specified Cooperative: You must not be a patron in a specified agricultural or horticultural cooperative to qualify for the deduction.
How to Enter QBI Deduction in Online Taxes Software
To ensure the QBI deduction is properly calculated:
- Go to the Federal section in 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.
Important Notes
- You are not required to itemize deductions to claim the QBI deduction.
- You can claim the QBI deduction from multiple businesses by entering each business’s information separately in the software.
- The QBI deduction is limited to 20% of your taxable income (before the deduction) and includes up to 20% of qualified REIT dividends and qualified PTP income.
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.