Qualified Business Loss carryforward evaporating

[JoeKerr]

I have a farm, operated as an LLC, and report its income/expenses on Schedule F. For many years I have used Turbotax Home & Business edition. The farm showed a loss for several years resulting in the accumulation of a significant Qualified Business Loss which Turbotax is reporting on Form 8995. In 2025 the farm finally generated a significant profit. I expected the losses carried forward from previous years would be available to reduce the 2025 profit, but the full amount of income calculated on Schedule F is reported on the 1040 as income for 2025.

Adding to the pain, the total Qualified Business Loss carryforward (Form 8995 Line 16) has been reduced by the amount of qualified business income shown on Form 8995 Line 2 (as a result of the Line 16 instruction to combine lines 2, a positive number, and 3, a negative number). 

To further magnify the pain, it appears that if there had been no loss carried forward I would have been able to take a qualified business income deduction equal to 20% of the 2025 total farm income.  So prior losses mean that I now pay more tax.

Can this be correct? Or is something being missed somewhere? The Schedule F in the Turbotax view form mode shows pages called Carryovers to 2025 Smart Worksheet including columns labeled QBI with lines for losses, but all of those lines are blank. 

The IRS information (https://www.irs.gov/newsroom/qualified-business-income-deduction ) indicates that I qualify for the deduction equal to 20% of the farm profit, but it is not being reflected in Turbotax. 

[Mike9241]

The QBI loss and the non-QBI loss (the loss you see on Schedule F) are separate. The Schedule F loss was likely allowed as a deduction in prior years, so you don't have it to offset current year Schedule F income. (If it was not allowed as a deduction on the 1040, it became a part of the NOL computation which TurboTax doesn't do so you may have an issue) However, net QBI losses carryforward indefiniely to offset QBI Inome. . In other words, it's possible not to have an ordinary loss carryforward but at the same time to have a QBI loss carryforward 

[JoeKerr]

Well, I decided to buy the Turbotax Live Tax Advice. The expert said that the way the tax code is written I will have no benefit from the years of Qualified Business Losses -- they cannot be used to reduce the amount of this year's profit -- and that furthermore until those accumulated losses disappear I will not enjoy the 20% qualified business income deduction. And he said that Net Operating Losses are not available because of the amount of income I have from other sources. 

So the changes to the tax code done over the past 8 years, sold to the public as protecting small business owners, have the opposite effect. 

[pvocker]

Did turbo tax expert say why the qbi losses from years prior would not offset the current years qbi?

[PatriciaV]

It's possible you reported taxable income over the QBI limit or your taxable income was zero. You can track this calculation on Form 8895 Lines 2-15. Prior year QBI loss carryforward appears on Line 3.

Per the IRS Instructions for Form 8995 Determine your QBI component:

To figure your QBI deduction, you must first determine your QBI component. Your QBI component is generally 20% of your QBI from your domestic trades or businesses. 

However, if your taxable income (before the QBI deduction) exceeds the threshold ($394,600 if married filing jointly, and $197,300 for all other returns), your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business. 

The partial or full reduction to QBI is determined by your taxable income. If your taxable income (before the QBI deduction) is:

• At or below the threshold, you don’t need to reduce your QBI;
• Above the threshold but below the phase-in range (more than $394,600 and $494,600 if married filing jointly, and $197,300 and $247,300 for all other returns), the reduction is phased in; or
• Above the threshold and phase-in range, the full reduction applies.