QBI calculating on Royalty Income from Oil Well

[KarenZeff]

I have received the same 1099-misc for a royalty from an oil interest for years. On my 2022 TurboTax desktop version, a QBI credit of $20 for this mineral royalty is calculating from somewhere. I should not be getting this credit. On the Schedule E Worksheet in forms under "Qualified Business Income Deduction Smart Worksheet", A1 asks "Is this activity a qualified trade or business" which is checked 'No'.  Nevertheless, I am getting a $20 QBI credit. I have been through the interview process over and over again and cannot figure out how to stop the QBI credit from being applied. What can I do to eliminate this credit. I tried deleting the Form 8995 and the QBI Deduction Summary but they automatically recreate. Please help.

[hbl3973]

KarenZeff,

This does seem to be a bug.  QBI is a deduction, i.e. a subtraction from your income, rather than a credit, a subtraction from your taxes.  You can offset that $20 by putting in a -$20 other income labelled, say "Offset TurboTax QBI".  Once my Desktop TurboTax finishes updating, I'll follow up with specific instructions for this workaround.

[hbl3973]

OK, the mechanics:

Go to Income, select Miscellaneous Income down at the bottom, then select Other Reportable Income, again at the bottom, and enter the description and the -20 there.

However, when I tried to reproduce your situation by entering a fake Oil & Gas Royalties schedule E, it did not produce a QBI.  The only place I see for the is-it-qualified checkbox is on the Schedule E worksheet visible in Forms View on the desktop version of TurboTax.  The yes/no boxes are both left blank but manually toggling them does produce the desired QBI result.  If left untouched, the Smart Check phase will find them and ask you about which one to toggle.  They work as expected in my test.

[Mike9241 · Accepted solution]

did you get a 1099-Div that reports 199A dividends on line 5.  that's where the QBI is coming from not royalties and it is proper. if you don't want the deduction delete what's on line 5.

[hbl3973]

Mike9241,

Good thought, thanks!  

[KarenZeff]

This turned out not to be a Royalty issue. And the person who recommended I review my 1099 was correct. I have owned SPDR's for over 2 decades. but the QBI credit did not take effect until 2018 tax year. Since 2018, the SPDR S&P 500 ETF TRUST never declared Section 199A dividends derived from REITS. This was my mistake. I overlooked that source of income on my consolidated 1099 for 2022. Thank you all for responding.