QBI Credit

[katie243]

Where do i enter the sale of grain to an ethanol plant in Turbo Tax so that the dollars of that sale are included in the Qualified Business Income calculations in Turbo Tax. Turbo Tax uses forms 4835 and schedule E as i am a crop share renter with no participation in the farming operations. If i enter these dollars anywhere but the section for 1099 PATR entries, TT will not accept QBI entry, saying it exceeds the amount allowed. Does income from grain sales to ethanol plants not qualify for this deduction. The ethanol plant does not issue a 1099.

Thanks. Tom

[MonikaK1]

Whether a specific type of income qualifies for the Qualified Business Income Deduction is a complex determination based on all facts and circumstances, and it may be subject to income limitations. Enter the income in the entry field that best fits the situation.

Even if you had received Form 1099-PATR, the amounts reported to you as your share of patronage dividends and similar payments on Form 1099-PATR aren’t automatically included in your QBI. Payments may be included in QBI to the extent they are:

1. related to your trade or business,
2. reported to you by the cooperative as qualified income items on an attachment to Form 1099-PATR, and
3. not payments reported as from a Specified Service Trade or Business, unless your taxable income is at or below the threshold, in which case payments from SSTBs are included in your QBI.

The cooperative itself isn't eligible for the deduction. See the IRS Form 8995 Instructions for more information.

If you received qualified payments reported to you on Form 1099-PATR from a specified agricultural or horticultural cooperative, you must reduce your QBI by the patron reduction and use Form 8995-A to compute your QBI deduction.

Form 8995-A is needed in some cases to report your qualified business income deductions.

• If your business is a sole proprietorship, partnership, limited liability company (LLC), or S corporation, you may qualify for the Qualified Business Income Deduction.
• With the Qualified Business Income Deduction you may be able to deduct up to 20% of your share of qualified business income.
• To claim the Qualified Business Income Deduction, file Form 8995 or Form 8995-1A along with your Form 1040.
• You can use Form 8995 if your 2023 total taxable income (before the qualified business income deduction) is less than $182,100 ($364,200 for joint filers) and you're not a patron of an agricultural or horticultural cooperative. Otherwise, you’ll use the longer Form 8995-A.

If you have no participation in the farming operations, and you are renting out the property to the grain farmer, then you may not qualify for the Qualified Business Income Deduction for this activity.

Rental real estate is treated as a trade or business for purposes of the Qualified Business Income Deduction under section 199A if it meets any of the following three tests:

1. The rental real estate rises to the level of a section 162 trade or business.
    
2. The rental real estate is a rental real estate enterprise meeting the requirements of the safe harbor provided in Revenue Procedure 2019-38 (and the direct owner of the property chooses to rely on the safe harbor). 
    
3. The rental or licensing of property is to a commonly controlled trade or business operated by an individual or a passthrough entity as described in Treas. Reg. section 1.199A-1(b)(14). This is often referred to as a self-rental.

A link to a PDF version of the Revenue Procedure, a summary of its provisions, and many more questions and answers are available at this IRS webpage.

The "safe harbor" provision, if it is relied upon, has four requirements, all of which must be met.

Please see this TurboTax help article regarding rentals and the QBID and this one regarding the QBI in general. Here is another Community discussion on this topic.