The Qualified Business Income (QBI) deduction, created by the 2017 Tax Cuts and Jobs Act, allows non-corporate taxpayers to deduct up to 20% of their qualified business income. Business owners and beneficiaries with income from a partnership, S Corporation, or trust reported on Schedule K-1 are generally eligible for the QBI deduction. TurboTax will automatically make the QBI deduction calculation for you based on your Schedule K-1 entries.
Types of Schedule K-1 Forms
Starting in 2019, the information for your QBI deduction is associated with a certain box and code on your K-1. Your K-1 will also have an attached Section 199A “Statement” with the amounts needed to calculate your QBI deduction.
The QBI box and code on your K-1 depends on which type of K-1 you have:
- For a partnership Form 1065 Schedule K-1, a Section 199A Statement is associated with box 20, code Z.
- For an S Corporation Form 1120S Schedule K-1, a Section 199A Statement is associated with box 17, code V.
- For a trust Form 1041 Schedule K-1, a Section 199A Statement is associated with box 14, code I (as in India).
Enter the appropriate code and Section 199A statement amount when you get to the corresponding box screen. Continue answering the interview questions until you get to the We need some information about your 199A income or loss screen.
On this screen, only enter amounts from your Section 199A Statement, not any of the other boxes on the K-1 form. When you check the box next to a line, an additional box will open where you can enter your Section 199A amount for that line. Continue, and you’ll find the Let’s check for uncommon adjustments screen. Enter any applicable Section 199A Statement amounts. These screens, to the extent applicable to your Section 199A statement, must be completed for your K-1 QBI information to be correctly inputted into TurboTax.
If your section 199A Statement has amounts related to the W-2 wages of your business or UBIA of qualified property, an amount must be entered or no QBI deduction will populate on your tax return. If left blank or zero is entered, no deduction is allowed.