QBI Capital Loss Carryforward to 2023 and 2023 Allowable Deduction

[poiuytrewq0987654321]

If I have loses from three separate K-1s that result in QBI Carryforwards from 2022 to 2023. Will I be able to take the maximum loss of -$3,000 per K-1 in 2023, for a total carryover of -$9,000, or is the total allowable loss for all carryovers combined a total of -$3,000?

[Tanisha EA]

If your net qualified business income is negative, then you have a qualified business loss. You can't claim a deduction on your current year's return, but you will carry the loss forward to the following year. Lines 16 and 17 are used to calculate the loss you'll carry forward.

https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-8995/L7dqp7NMg

Any negative QBI carried into the subsequent tax year as a qualified business net loss carryforward will be used in that subsequent year to determine the net qualified business income or loss in that year.

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[marctu]

@poiuytrewq0987654321  you may want to supplement your question if this does not answer your question.

So what is the Qualified Business Income ("QBI") deduction?  It is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes.

Then why do I have to track QBI carryforward losses?  If the total QBI from all trades or businesses is less than zero, the taxpayer's QBI Component will be zero and any negative amount is carried forward to the next taxable year, where it would offset QBI in the tax year to which it is carryforward.

So the QBI carryforward loss could impact the QBI deduction in a future tax year.  So if you have $3,000 loss in all three entities with a K-1, your carryforward would be $9,000.  So to get a QBI deduction in a future year your QBI would need to exceed $9,000.  

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

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[poiuytrewq0987654321]

Hi Mark, 

Thanks for your explanation.

To clarify:

I will have a large QBI carry forward loss in 2022.  On future returns, when claiming a QBI carry forward deduction, can I decide the amount I want to use each year, as long as the loss is less than the QBI amount that I have earned that year?

Kind regards,
Christine

[marctu]

@poiuytrewq0987654321 so you would not have a choice per se.  After accounting for the carryforward QBI, it you have positive QBI you would take the deduction on that years tax return.  It is to your benefit to take it as soon as possible as it lowers taxable income in that year.

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

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[poiuytrewq0987654321]

Hi Again Mark,

Thanks for your patience and explanations. One more question/clarification:

In 2022, from 1040 line 11 (AGI) was less than 1040 line 12 (Schedule A itemized deductions). 

The 2023 QBI Carryforward loss will likely be greater than my 2023 QBI income. And

In 2023, Form 1040 AGI will likely be less than 1040 Schedule A itemized deductions. (In other words, it is likely, I won't need to use all of the carry forward loss in 2023 to bring my taxable income to zero.)

Is there a way to reserve an additional amount of of the QBI carry forward for use in 2024? (Such that my 2023 AGI and Schedule A itemized deductions are roughly the same amount?)

Thanks again!

[marctu]

@poiuytrewq0987654321 thank you for the additional information.  So in 2023 as you wrote, "the 2023 QBI Carryforward loss will likely be greater than my 2023 QBI income".  So if this is the case the QBI deduction would be zero.   Unless I am misreading this.  

Also itemized deductions or the standard deduction are reflected on Line 12 of the 2022 1040 and QBI Deduction is on Line 13.   

Ultimately you have to take the deduction if you have QBI income to offset.  There is no way to not use it other than saying that it is not QBI.  Lastly, as this was part of the Tax Jobs and Cuts Act of 2017,  which may expire at the end of 2024, you want to use it as soon as you can.

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

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[Aliska]

Hi there,

I just learned about QBI loss carryover. I had a loss in 2021 which did not carryover in 2022 in Turbo Tax. Looks like I had to input it manually but I did not. Can I use it in 2023 or do I have to amend 2022 return?

[Critter-3]

You must first amend the 2022 return to take into consideration the loss carryforward that could have been used (if any) and to properly calculate any carryforward to the 2023 return.  

[Aliska]

Thank you. I wonder why TT did not put it automatically as everything else?