QBI Deduction Not Deserved?

[GCLC]

I'm been fully retired for 8 years and only have investment income but TurboTax Premier 2019 keeps generating a Qualified Business Income (QBI) deduction for me.  I've used TTP for all those years and it never produced this deduction.  I don't believe I qualify for this as I do not earn an income but can't seem to get rid of this generated deduction. Perhaps it has something to do with a partial conversion of my Rollover IRA to a Roth IRA and therefore received a 1099-R?

Is this a bug with TTP or is something else going on?  Please advise.

[Bsch4477]

Look at your 1099-DIV.  You probably have an amount in Box 5 which will trigger the QBI and is correct.

[55tax]

I have the same issue.  I am NOT self employed and the REIT deduction is $10.  Big deal.  Would rather file now and not claim the $10 with the added forms and hassle.  So how do I edit the 1040 using TurboTax and remove the deduction?

[JamesG1 · Accepted solution]

I suspect that the REIT is qualifying you for the 199A deduction. 

REIT dividends generally are reported on a Schedule K-1 or in box 5 of a 1099-DIV.

It is possible that if you remove the entry, that the IRS may question you at a later time about the income.

IRS form 8995-A may be available in TurboTax on February 20, 2020.  See availability here.

[55tax]

never mind.  saw in another thread that you just amend the 1099 DIV to eliminate the breakout of 199A and it's good to go.  sorry for the intrusion.

[Bsch4477]

If the amount is in box 5 of a 1099-DIV you can just delete it.  Since that amount is included in Box 1 your tax liability will be unaffected by deleting Box 5 but of course you won’t be getting the small advantage of the QBI. 

[GCLC]

Thank you very much for the information!  Good to know that the amounts in Box 5 of the 1099-DIV is already included in Box 1 of same form.  May I ask what is the small advantage of the QBI if deleting Box 5 amounts does not affect the tax liability?

[GCLC]

Thank you.  Yes, there were REIT mutual funds present so that must explain why Box 5 has income.  The confusion lies in the QBI (Qualified Business Income) as I have no business income, just mutual fund income.

[JamesG1]

The Qualified Business Income Deduction was approved for the 2018 tax season.  We generally think of it in terms of self-employment income but REIT dividends do qualify.

Just delete the amount in box 5 and see what difference it makes to your bottom line.

See this IRS press release under What is the Qualified  Business Income Deduction?

"This deduction, created by the 2017 Tax Cuts and Jobs Act, allows non-corporate taxpayers to deduct up to 20 percent of their QBI, plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income."

[mjwdhw]

I am also retired with no operating business.  A 1099-DIV I received reflected a Section 199A dividend and Turbotax Premier automatically generated a 20% deduction on the amount.  With no operating business, I too am skeptical as to eligibility to receive this deduction.  Did you get an answer to that part of your original question - ie. eligibility if not operating a business, only holding investments (e.g. mutual funds) that generate 199A dividends reported in box 5?  

If you have no business but merely are owner of a mutual fund that generates these qualifying dividends, can you take the deduction?

[CatinaT1 · Accepted solution]

Yes.  Many times you qualify for the QBI deduction because of your investments.

[55tax]

the answers I received were very deliberate in their wording such as 'may qualify for deduction' or 'many mutual funds qualify'.

I personally chose not to claim the deduction because of the lack of a "definitive" answer specific to me.

[GCLC]

I understand your concern and I sympathize.  How do you go about the TurboTax process of not taking the deduction?  If you zero out the Section 199A dividends, doesn't this equate to not reporting income that has been reported?

[JohnB5677]

If you have 199A dividends you are entitled to the deduction.  The IRS says:

"Many owners of sole proprietorships, partnerships, S corporations and some trusts and estates may be eligible for a qualified business income (QBI) deduction – also called Section 199A – for tax years beginning after December 31, 2017. The deduction allows eligible taxpayers to deduct up to 20 percent of their qualified business income (QBI), plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income."

Please see full text at:   IRS Qualified Business Income Deduction

[Bsch4477]

@GCLC No. The amount in Box 5 is already included in the amount you reported in Box 1.