QBI Carryforward Loss

[tidubaga]

Hi. 

I have around $2900 that has been showing as "Qualified business net (loss) carryforward from the prior year" on the last 2 returns. I now make a salary and interest income only. 

Can I deduct / offset this if I have no QBI this year (only W-2 wages and Interest income)?

Thanks.

[ThomasM125]

No, the qualified business income deduction (QBI) only applies to business income. If you have a business loss one or more years, you may have a QBI loss carryforward that can only be used to offset business income in future years. If your business income is more that your QBI loss carryforward, then you may qualify for a QBI deduction in that year. Since you don't have any business income anymore, you can't use the loss against it.

[Mike9241]

this is a forever carryover unless the law changes. if 10 years down the line you have QBI income then some or all of your QBI loss will be used.  

[hawapani123]

This is interesting. I had the same scenario where I had $3500 carry over business loss from 2023 In year 2024, I had a income of $2000, based on what you wrote, I can't offset this $2000 income from carryover loss since it is still less than $3,500 carry over loss. Is that correct? This is the way Turbo tax is treating as well. So I am still end up paying tax on $2000 income even though I have a carry over loss. It really doesn't make any sense to me. 

Am I missing something? I was expecting that it should at least offset my $2000 income with carry over loss and then leave my carry over loss to $1500 for next year. 

[MonikaK1]

It depends. Did you review all of the forms and worksheets that TurboTax prepared from your entries, such as Form 8995 / Form 8995-A? Did you transfer your 2023 information to your 2024 return?

If you have a K-1 carryover loss and don't have 2023 information in your 2024 return, you can manually enter the QBI carryover. See this help article for steps. 

From this IRS FAQ page:

A taxpayer must net their QBI, including losses, from multiple trades or businesses (including aggregated trades or businesses). So, qualified business losses from one business will offset QBI from other trades or businesses (including aggregated trades or businesses) in proportion to the net income of the trades or businesses with QBI.

If the total QBI from all trades or businesses is less than zero, the taxpayer's QBI Component will be zero and any negative amount is carried forward to the next taxable year. 

The carried forward negative QBI will be treated as negative QBI from a separate trade or business for purpose of determining the QBI Component in the next taxable year. 

Any negative QBI carried into the subsequent tax year as a qualified business net loss carryforward will be used in that subsequent year to determine the net qualified business income or loss in that year. If the net loss carryforward from the originating year is not fully absorbed in the subsequent year, the new net loss amount will become a qualified business net loss carryforward to be applied in the subsequent year.

@hawapani123

[hawapani123]

Thanks for the explaination. One more thing, this QBI loss doesn't offset any W2 income, correct? 

Also, If I have schedule C loss, Is that also reduces W2 income or not? 

Thanks

[MonikaK1]

The Qualified Business Income deduction appears on Line 13 of Form 1040, so it serves as a deduction from your Adjusted Gross Income in arriving at your overall Taxable Income.

A profit or loss on Schedule C appears on Schedule 1, which flows to Line 8 of Form 1040, so it is part of your overall Adjusted Gross Income along with your wages.

@hawapani123 

[hawapani123]

It looks like it is driven by form 8995 (refer screen shot below) , which making this deduction zero which is not making sense to me, Can u help in clarifying this? 

[DianeW777]

Yes, first it will go to Form 8995 and if there is any allowable qualified business income deduction (QBID) it will carry to your 1040, Line 13 as indicated by our amazing Tax Expert @MonikaK1. When you enter the information TurboTax will automatically do the calculations.

Wages are not part of qualified business income however the taxable income is factored in to see what the allowed QBID might be. It is a 'lesser than' calculation. You cannot use that loss against personal income.  You can carry it forward to offset any future qualified business income (QBI) for a business or investment K-1 profit or positive qualified business income (QBI).

To include your QBID carryforward loss so that it is not lost you can use the steps below.

• TurboTax Desktop or TurboTax Online
  • Business Income and Expenses > Less Common Business Situations > Net Operating Loss/QBI Carryforward Loss

@hawapani123