Is the Qualified Business Income deduction always subject to income limitations? I received it in regard to some REIT dividends, but not for the bulk of income on K-1.

[ToddL99]

What was your K-1 from - an S-Corp or Partnership? 

[Mike9241]

there are income limitations. one is based on filing status. one is based on whether or not the business income is from a Specified Service Trade or Business.  The IRS can deny the deduction if a previous W-2 employer is now treating you as an independent contractor. this can be rebutted,

the code section is a couple of pages. the Regulations which fill out what the code says are several hundred.

here's a link to the code section 199A if you're interested.

https://www.law.cornell.edu/uscode/text/26/199A 

[jmersfel]

Thanks. This was from a partnership. It was pass through income related to farm income reported on Schedule F, so I don't believe it should fall into the SSTB category and there have not been any W-2 wages associated with it. Thanks again for your help.  

[ToddL99]

Yes, the Qualified Business Income Deduction is always subject to income limitations. As noted by @Mike9241, they are based on filing status and whether or not the business income is from a Specified Service Trade or Business

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.

If the partnership reported Qualified Business Income (Sec. 199A), there will be a Code Z entry in Box 20 of the Schedule K-1. 

After entering Code Z in the K-1 interview, the TurboTax program will ask a number of questions that will help determine whether the income qualifies for the QBI deduction.

See the following article for an overview of What is the Qualified Business Income (QBI) deduction?

[jmersfel]

Thanks. So if you exceed the income threshold in general, it doesn't matter whether the QBI comes from a SSTB, correct? I have gone through the K-1 interview, and with the code Z from my K-1, and it looks like I'm flunking the income test. However, there are small amounts of QBI still showing up on my return. Those appear to be coming from some REIT dividends. Would those be subject to a different test? 

[ColeenD3]

Yes. Please see this LINK for more information.