Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
jmersfel
Level 1

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.

 
6 Replies
ToddL99
Expert Alumni

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.

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

 

Mike9241
Level 15

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.

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
Level 1

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.

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
Expert Alumni

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.

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
Level 1

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.

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
Expert Alumni

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.

Yes. Please see this LINK for more information.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Dynamic AdsDynamic Ads
Privacy Settings
v