What is My QBI if My Business Isn't Profitable?
If your business is not profitable, your Qualified Business Income (QBI) may still be calculated based on your business’s net loss, but only if certain items are included in your taxable income. QBI includes qualified items of income, gain, deduction, and loss from your trade or business that are effectively connected with the conduct of a trade or business in the United States.
Key Points for Non-Profitable Businesses
- QBI includes deductions and losses that are allowed in calculating your taxable income for the year.
- Items disallowed or limited (such as basis, at-risk, passive loss, or excess business loss rules) are not included in QBI until the year they are included in taxable income.
- QBI does not include items that are not properly includible in income.
- Even if your business shows a net loss, you may still have QBI if the deductions and losses are properly includible in taxable income.
What Is Included in QBI?
QBI includes, but is not limited to:
- Unreimbursed partnership expenses
- Business interest expense
- Deductible part of self-employment tax
- Self-employment health insurance deduction
- Contributions to qualified retirement plans
Important Considerations
- QBI is determined based on items that are included in taxable income. If a deduction or loss is suspended or disallowed under another section of the Code, it is not included in QBI.
- A Section 1231 gain or loss is only includible in QBI if it is not treated as a capital gain or loss.
- Use Form 8995 or Form 8995-A to compute your QBI deduction, depending on your income level and business type.
Source:
Form 8995, Qualified Business Income Deduction Simplified Computation
Form 8995-A, Qualified Business Income Deduction
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.