2025 Form 8995-A QBI Calculated Incorrectly

Forum|Forum|7 months ago
February 11, 2026
2 replies
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I have ordinary business income from a K-1 (LLC). I have no business-related health insurance costs, but I do have Unreimbursed Partner Expenses and SEP IRA contributions. There is no foreign income, REIT income or any other types of income on the K-1 other than ordinary business income.

The QBI on Line 2 of Form 8995-A should be (I believe) the K-1 Box 1 amount, less the UPE, SEP IRA contributions and 1/2 of the Self-Employment Tax. I also have H&R Block tax software, and confirmed this is how they calculate the QBI.

TurboTax is mysteriously adding $287 to my QBI, which I can't trace to any number on my tax form. What am I missing?

Best answer by DaveF1006

It depends. In this case, $287 is likely the 7.65% (1/2 SE Tax) of $3,750. This suggests TurboTax is applying a specific "Self-Employment Tax Adjustment" logic that H&R Block may be ignoring or handling differently.

There could be a SEP IRA "Netting" Error. Sometimes calculates the SEP deduction limit based on the gross K-1 income but then applies a "correction" if the UPE reduces your "Net Earnings from Self-Employment" below what supports that SEP contribution.
$287 is exactly 20% of $1,435. Do you see $1,435 anywhere in your UPE or SEP calculations? If so, the software might be failing to reduce the QBI by the full amount of an expense, only applying a 20% "benefit" factor instead of a 100% deduction.
Could be an allocation of the 1/2 SE tax. TurboTax does not just subtract your total 1/2 SE Tax from your K-1. It uses a proportional allocation worksheet. If you have any other income on your return (even a small 1099-INT or dividends), TurboTax calculates how much of your SE Tax "belongs" to each income source.
If TurboTax gives you $287 less of your SE tax deduction for this K-1 than H&R Block, your QBI will be $287 more.
You can check this if you are in the Desktop version by:

Switching to Forms Mode (top right) and open the QBI Component Worksheet. Look for the line "Self-employment tax deduction allocable to this business." If this number is lower than your total 1/2 SE Tax on Schedule 1, you've found your answer.

DaveF1006Answer

Level 15

There could be a SEP IRA "Netting" Error. Sometimes calculates the SEP deduction limit based on the gross K-1 income but then applies a "correction" if the UPE reduces your "Net Earnings from Self-Employment" below what supports that SEP contribution.
$287 is exactly 20% of $1,435. Do you see $1,435 anywhere in your UPE or SEP calculations? If so, the software might be failing to reduce the QBI by the full amount of an expense, only applying a 20% "benefit" factor instead of a 100% deduction.
Could be an allocation of the 1/2 SE tax. TurboTax does not just subtract your total 1/2 SE Tax from your K-1. It uses a proportional allocation worksheet. If you have any other income on your return (even a small 1099-INT or dividends), TurboTax calculates how much of your SE Tax "belongs" to each income source.
If TurboTax gives you $287 less of your SE tax deduction for this K-1 than H&R Block, your QBI will be $287 more.
You can check this if you are in the Desktop version by:

Switching to Forms Mode (top right) and open the QBI Component Worksheet. Look for the line "Self-employment tax deduction allocable to this business." If this number is lower than your total 1/2 SE Tax on Schedule 1, you've found your answer.

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spunkloveAuthor

Level 2

Thanks for the suggestions! I've been through each item you suggested, and I think I found the smoking gun (Item 1). Regarding your 5 suggestions below:

1. If I take the % of my UPE to my total K-1 income (Box 1), and I apply that percentage to both the SEP Contribution and 1/2 SE tax, it sums to $287! Turbo Tax must be adding that % back to my QBI as an added benefit. Evidently, H&R Block doesn't do that.

2. $1435 is more than my total UPE and a lot less than my SEP deduction, so can't be that.

3. I have numerous sources of income (W-2s, 1099s) that exceed the K-1 income, so couldn't explain the $287 difference.

4 & 5. The root of the problem is that nowhere does TurboTax explain how they generate the QBI number. My QBI Component Worksheet does not have a line "Self-employment tax deduction allocable to this business," nor does the QBI Deduction Summary, nor does Form 8995-A.