How to apply or count for 20% pass-through deduction of income for 2019?

[khyami]

I am using Turbo Tax to file 2019. I am facing a challenge with the 20% pass-through deduction of income for 2019 and not sure how to count for it and mention it in what section? any assistance is much appreciated. 

[GiseleD · Accepted solution]

The 20% deduction is for Qualified Business Income (includes many rental properties and REITs), and TurboTax will calculate this automatically in many cases. If your specific situation requires that adjustments be made, TurboTax will prompt you on this during the interview. Here is some more information about QBI:

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 $157,500 ($315,000 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.

Click here for more information about QBI.

[khyami]

Many thanks for the detailed response and answer. Much appreciated. 

[noname87]

I have done my taxes and Turbotax did not do this calculation. What section do I need to do to achieve this. I know I can go into forms and do tis manually but I was hopefully for some guidance. 

[DavidS127]

TurboTax automatically calculates your Qualified Business Income (QBI) deduction based on the entries you make for QBI businesses (Schedule C self-employment income, Schedule E rental income) or the entries you make for QBI income "passed through" from other businesses (1099-DIV, Schedule K-1).  There are limits on the calculation, however, and losses from 2018 for a QBI business will offset income in 2019 before the QBI deduction is calculated.

If you provide the details on the source of your QBI, it will help diagnose your issue.

[jhnyguitar]

I'm a Realtor with an S Corp.  My net income from business activities qualifies for the 20% pass through deduction.  This I know.  But I can't figure out how to put that into TT.  Where do I indicate that the income is QBI?

[SwampYankee]

The software will absolutely not apply the deduction automatically.  I am using the 2020 version it STILL does not work.  You need to go into the FORMS and click the box in Schedule C that you are qualified for QBI.  IT WILL NEVER DO THIS FOR YOU.  

[AmyC]

Correct,you must enter the QBI section for the program to calculate the QBI for non-dividend related QBI. You must validate SSTB. The other agent was saying it calculates it for you after you go through the screens. If you are an SSTB and your income is over the threshold, then you would not qualify.

See 

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

[BKARNOFSKY]

I'm still lost. I had rental income that was entered in schedule E.  I don't see the 20% deduction on that form, and turbo tax didn't generate a schedule C.  Do I need to create a schedule C, or what should I do?

[DaveF1006]

There is a question you may have missed regarding the QBI deduction. 

1. Navigate to your rental summary screen in Turbo Tax.
2. Select done with rental property at the bottom of the page.
3. Navigate to a screen that asks  if you want to use a safe harbor to qualify this property for a deduction.
4. Answer the question as it pertains to you.
5. Once you answer, then there will be a dropdown that lists the requirements for the deduction. See screenshot below.
6. Answer the remaining questions in the section to qualify for the QBI deduction.