You may combine, or aggregate, several trades or businesses into a single entity so you can apply the W-2 wage limitation or the unadjusted basis immediately after acquisition of qualified business property limitation if you meet these requirements:
- You or a group of persons own at least 50% of each trade or business for a majority of the tax year, including the last day of the tax year, and all trades or businesses have the same tax year-end;
- None of the trades or businesses are an SSTB; and
- All trades or businesses meet at least two of these conditions:
- They provide products, property, or services that are the same or are customarily offered together.
- They share facilities or significant centralized business elements such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources.
- They are operated in coordination with, or reliance upon, one or more of the businesses in the aggregated group.
If your businesses meet these requirements and your 2020 taxable income before the QBI deduction is $163,300 or less ($326,600 or less if filing jointly), there's no advantage to aggregating your businesses for the QBI deduction, at least not this year. On the other hand, if your taxable income exceeds these amounts, aggregation may be advantageous, but it's not a given; that depends on your relative income, W-2 wages paid, and business assets.
If it's advantageous, go ahead and aggregate; if not, you can always aggregate in the future if and when it does work to your advantage. However, once you aggregate your businesses for QBI purposes, you must continue to do so on future returns.
If you indicate in TurboTax that your business is aggregated with your other businesses, we'll ask you to enter:
- A description of the combined businesses and the IRS rules that allow these businesses to be combined for QBI purposes; and
- An explanation of what changed from last year, if the businesses that make up the aggregation are different from last year.
We'll report the QBI deduction for your combined businesses on Form 8995-A (Deduction for Qualified Business Income) with Schedule B (Aggregation of Business Operations).