I'm applying my Qualified Business (Net) Loss from last year to this year's tax return, but it doesn't decrease my AGI; it only decreases my QBI deduction. Therefore INCREASING my tax load. Am I missing something?
Details:
- I incurred a $1000 loss on my Schedule C (sole proprietorship) business in 2020, which I carried forward as a $1000 qualified business (loss) carryforward (Form 8995 Line 16).
- For tax year 2021, I had a $200 profit from the same Schedule C business. However when I try to use $200 of my $1000 carried-forward QBI loss from 2020, my tax burden INCREASES.
- The is because by QBI deduction goes to zero (rightly so, since my QBI is now $0 after the carry-forward is applied), but my Schedule C income stays the same at $200. So now I'm still paying the tax on the $200 Schedule C income, but now without any QBI income deduction.
Shouldn't applying a carried-forward qualified business loss make your AGI go down as well? Why would anyone want to use their carried-forward loss otherwise?
Thanks for your help.
