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Taxable Income Limitation - QBI

Updated: Mar 3

The taxpayer’s total QBI deduction is limited to 20% of his taxable income.  The taxpayer’s taxable income is calculated before the QBI deduction.  Net capital gain is subtracted from taxable income prior to calculating the QBI deduction.

New for 2019:  Calculate Qualified Business Income (QBI) on Form 8995 or Form 8995-A


As shown previously in this section, QBI was calculated for 2018 using the worksheet from the Form 1040 instructions (line 9), 2018 Qualified Business Income Deduction—Simplified Worksheet, or the Worksheet 12-A, Qualified Business Income Deduction Worksheet, from page 54 of Publication 535, Business Expenses, along with whichever of the following schedules (also from Publication 535) is applicable:


  • Schedule A—Specified Service Trades or Businesses (SSTB);

  • Schedule B—Aggregation of Business Operations;

  • Schedule C—Loss Netting and Carryforward; or

  • Schedule D—Special Rules for Patrons of Agricultural or horticultural Cooperatives (Coop).

The taxpayer was required to retain the worksheet and any schedule that was used to compute the 2018 QBI in his 2018 tax records.

These worksheets and schedules have been replaced for 2019 by Form 8995, Qualified Business Income Deduction Simplified Computation, and Form 8995-A, Qualified Business Income Deduction.  The form that the taxpayer uses to compute QBI (Form 8995 or Form 8995-A) must be included with the 2019 tax return.  Form 8995 should be used if the taxpayer is under the income thresholds for 2019.  Form 8995-A should be used if the taxpayer is over the income thresholds for 2019.  See the following paragraphs for the applicable 2019 income thresholds and other factors to consider in using each form.


Form 8995 should be used by the taxpayer if for 2019:


  • The taxpayer has QBI, REIT dividends, or qualified publicly traded partnership (PTP) income;

  • 2019 taxable income prior to the QBI deduction is no more than $160,700 for Single and Head of Household returns, $160,725 if Married Filing Separately, and $321,400 if Married Filing Jointly; and

  • The taxpayer is not a patron of an agricultural or horticultural cooperative.


Taxpayers who used the 2018 Qualified Business Income Deduction - Simplified Worksheet to compute their QBI deduction in 2018 because they were under the income threshold would instead be required to use Form 8995 for this computation in 2019.


  • Form 8995-A should be used by the taxpayer if, for 2019:

  • The taxpayer has QBI, REIT dividends, or qualified publicly traded partnership (PTP) income;

  • 2019 taxable income prior to the QBI deduction is greater than $160,700 for Single and Head of Household returns, $160,725 if Married Filing Separately, and $321,400 if Married Filing Jointly; and

  • The taxpayer is a patron of an agricultural or horticultural cooperative.


Form 8995-A, Parts I-IV, replaces 2018 Worksheet 12-A, Qualified Business Income Deduction Worksheet, from Publication 535.  Schedules A, B, C, and D are also part of Form 8995-A and are shown below.  These schedules will be used as required.



Schedule A replaces 2018 Schedule A, Specified Service Trades or Businesses (SSTB), from Publication 535.  It will be completed as indicated above. 




Schedule B replaces 2018 Schedule B, Aggregation of Business Operations, from Publication 535.  This schedule would be used by individuals or pass-through entities engaged in more than one trade or business, if they met specified requirements, to apply the W-2 wage limitations or the UBIA (unadjusted basis immediately after acquisition) limitation to an aggregated single trade or business instead of each individual entity.


As indicated previously in the discussion of qualified business income (QBI), the "unadjusted" basis of qualified property eligible for depreciation, bonus depreciation, §179 depreciation, etc.  This is normally the basis on the date the asset is placed in service. 

If there is any change in trade or business aggregation from the prior year, the taxpayer must provide an explanation.



Schedule C replaces 2018 Schedule C, Loss Netting and Carryforward, from Publication 535. 


The taxpayer must complete Schedule C before starting Part I of 8995-A if he has trades or businesses with a net loss for the current tax year or a qualified business net loss carryforward from prior years. 


Schedule C offsets trade or business net losses against net income from other trades or businesses.  The net loss must be apportioned among all trades or businesses with net income in proportion to their net income.  If the taxpayer’s QBI from the total combined trades or businesses is less than zero, then QBI is zero for the tax year.  The negative amount will be carried over and recognized as a separate trade or business in future tax years.



Schedule D replaces 2018 Schedule D, Special Rules for Patrons of Agricultural or Horticultural Cooperatives (Coop) from Publication 535.  These are cooperatives that market or engage in manufacturing, producing, growing, or extracting agricultural or horticultural products.


This worksheet will be completed if the taxpayer has QBI and receives qualified payments from one or more cooperatives.


Schedule D should be completed before completing Schedule A.

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Cathy Fisher

Common Cents Bookkeeping and Tax Preparation

Serving Henderson, NC, Buncombe County, Polk County, Transylvania County

E: cathy@commoncentsqbo.com

P: 828-595-2835

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