Qualified Business Income Deduction

[mcgrathjim]

My deduction summary is showing a total of $360 labelled as "Qualified Business Income Deduction".  I don't own a business and didn't enter any such data.  What is this, and am I truly entitled to this deduction.

[DavidS127]

You can get the Qualified Business Income (QBI) deduction even if you don't personally run a business, because the QBI deduction applies things other than income from businesses you run personally.  

Eligible taxpayers to deduct up to 20 percent of their 1099-DIV box 5 Section 199A dividends, qualified real estate investment trust (REIT) dividends, and qualified publicly traded partnership (PTP) income. 

You do not enter this deduction, it is automatically calculated by TurboTax based on your other entries, so you should be able to find one of the above types of income entered in your tax return from a 1099-DIV or a Schedule K-1.

[carolinefreibergerfinley]

Turbo Tax Premier is still not calculating the qualified business Income (QBI) deduction for the Section 199A REIT dividends from the Schedule K-1 (line 14).

[ritaburd]

David ... a little different question on QBI.  One property in a Trust generates both rental and royalty income.  Does the Trust claim QBI for each?

[DavidS127]

If you are using a Download/CD version of TurboTax, check for updates to your TurboTax (menu at top, Online>>Check for Updates).  TurboTax Online will be updated when you sign in.  Recent updates (since 3/10/2020) have resolved some of the issues related to Section 199A/REIT dividend QBI reporting.

Use the following steps to clear the error related to your box 14 code I:

1. Go back to the K-1 for the trust and click Edit;
2. At the "Box 14 Info" screen where your code I and the amount is entered, click Continue three times to get to the "We see you have Section 199A income";
3. On that "We see you have Section 199A income" screen, check the box "The only source of Section 199A income is Section 199A dividends (also called "REIT dividends"), not business income" (assuming that is true);
4. Continue to the next screen, and your amount should already be entered in the box (if not, enter the REIT dividend amount);
5. Click Continue, and then Done.

This will resolve your issue with your box 14 code I information when you have only REIT dividends.

To get back to the K-1 summary screen and find the Schedule K-1 to edit, click the "magnifying glass Search" icon on the top row, enter "k-1" in the search window and press return or enter, and then click on the "Jump to k-1" link to find the K-1 you need to edit.

@carolinefreibergerfinley

[DavidS127]

Yes, royalty and rental income received from a trade or business property owned by the trust will each generate QBI for the trust to pass through to beneficiaries, assuming that the income for each qualifies as QBI for the property held by the trust.  For example, rental real estate may or may not qualify as QBI, depending on whether the rental property meets the IRS safe harbor requirements.  See the IRS article on the rental real estate safe harbor at this link for an overview of the safe harbor requirements for rental real estate.

Note that the royalties and rentals will be reported in different boxes on the trust K-1 for recipients.  As a result, the recipient may need to enter the trust K-1 into TurboTax as if it were reported on two separate K-1s--one for the royalty income reported in box 5 "Other portfolio and nonbusiness income" and the second for "net rental real estate income" reported in box 7.

@ritaburd