20% Pass-Through Tax Deduction for Business Owners in TT Premier?

[gwjm56]

Hello.

Is the 20% Pass-Through Tax Deduction for Business Owners, the massive tax reform law that took effect in 2018, calculated in the TT Premier product or would I need a different TT product?

Thank you

Gary

[MinhT1]

The 20% Qualified Business Income deduction is calculated and reported on Form 8995.

And form 8995 is supported by TurboTax Deluxe, Premier and Self-Employed.

[gwjm56]

Thank you for your reply.

In reviewing my 2019 tax return completed by TT Premier last year I see that there was no Qualified Business Income deduction entered on line 10 of form 1040.  I also see that TT did not prepare form 8995.

In the IRS instructions for form 8995 found here  in the paragraph that begins with "

Determining if items included on Schedule K-1 are included in QBI" it states:

To figure if the item of income, gain, deduction, or loss is included in QBI, you must look to how it’s reported on your federal income tax return. For example, ordinary business income or loss is generally included in QBI if it was used in computing your taxable income

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As you know we are to compute the Qualified Business Income Deduction starting with Qualified Business Income.  I am the sole  employee of my S Corp LLC business.  Last year I completed the Schedule K1 for my business using TT Business and that Schedule K1 applied to me, the lone shareholder.  I must have missed the part of the TT interview that covers the section "Section D1 Qualified Business Income Deduction - Statement A Information" of Schedule K1, as I see in that section the "Shareholder’s share of QBI or qualified PTP items subject to shareholder-specific determinations:" was not completed.

I'm not going to go through the time and expense of figuring out why and redoing last year's tax return, however, for completing the 2020 returns I would like to know what entries I should be looking out for while working through the TT Business desktop app that will result in this Schedule K1 Section D section being complete because, like last year, I most certainly will have qualified business income and a level of taxable income below the threshold limit which together should then provide to me the 20% income deduction.

Can you please advise and thank you again for your time and patience.

Gary

[AmyC]

 If you are reporting income from an S corporation (form 1120-S), then you would need an entry in box 17 coded "V". The program will calculate the QBI for you.

Related:

Do I qualify for QBI?

About Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc.

[gwjm56]

AmyC:

Thank you for your response.  Two items concerning your response:

1. The link you posted for "Do I qualify for QBI" belongs to user tmurphy7 and therefore Microsoft OneNote states I do not have permission to open it.
2. You stated: "... then you would need an entry in box 17 coded "V". The program will calculate the QBI for you...".  Thank you for that piece of information however I would really need to know where in the TT Business Step-by-Step do I need to make entry(s) that will cause a "V" code to be placed in box 17 on Schedule K-1.

Thank you

[AmyC]

Try these:

• What is the Qualified Business Income (QBI) deduction?
• Qualified Business Income Deduction | Internal Revenue ...
• What is QBI? IRS newsroom
• QBI FAQ

2. Information regarding rental and sec 199a dividends will help. Since I don't know more about your business, see:

Qualified Business income deduction 199A worksheet. first is this new for 2018. I do not...

Should I be able to get a QBI Deduction on my income from an S Corp?

[gwjm56]

AmyC:

Thank you for the links.  They are most helpful in helping me understand how and when this 20% deduction would apply.

I still am in need of some information pertaining to this deduction in regards to the step-by-step TT program.  Specifically, where in the TT program are entries made for the generation of the form 8995  "Qualified Business Income Deduction Simplified Computation" ?

Thank you

[ReneeM7122]

The 20% Qualified Business Income deduction is calculated and reported on Form 8995.  Form 8995 is supported by TurboTax Deluxe, Premier and Self-Employed, and TurboTax generates the form automatically based upon the entries that you make for  your business income.  

The Qualified Business Income deduction (also called the QBI deduction, pass-through deduction, or section 199A deduction) was created by the 2017 Tax Cuts and Jobs Act (TCJA) and is in effect for tax years 2018 through 2025.

With the QBI deduction, most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax (but not self-employment tax) whether they itemize or not.

The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $163,300 ($326,600 if filing jointly), the type of business also comes into play.

At incomes below that level, the deduction is 20% of either taxable income (minus capital gains and dividends) or the QBI, whichever is less.

At higher income levels, the deduction is reduced or eliminated, depending on the nature of the business. The calculations also get quite complicated, but TurboTax easily handles them and will figure out how much of a deduction you’re entitled to.

Here is a TurboTax article that explains QBI in greater detail.

@gwjm56