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Enter qualified business income (QBI) from partnerships and S corporations
Enter qualified business income (QBI) information from Schedule K-1 on the K1QBI screen. Use multiple K-1 units when taxpayers have different activity types to ensure accurate QBI deduction calculations.
Enter information from partnership or S corporation Schedule K-1 statements on the K1QBI screen. When a partnership or S corporation reports multiple trades or businesses in the QBI/qualified PTP items section of the Schedule K-1 statement, add additional units on the K1QBI screen to capture each business separately.
Use the K1QBI screen to enter information from the partnership or S corporation. When a partnership or S corporation includes more than 1 trade or business on the
QBI/qualified PTP items subject to partner-specific determinations
from the Schedule K-1 statement, enter this information on the K1QBI screen by adding more units. When to use multiple K-1 units
We recommend creating multiple K-1 1065 or 1120S units instead of multiple K1QBI screens when the taxpayer has:
- A mixture of passive and active activities
- Regular activities and publicly traded partnerships with losses
- Both regular activities and specified service businesses
How partnerships report QBI
The partnership or S corporation initially determines which items qualify as qualified income, gain, deduction, and loss. It then provides each partner with their distributive share of items that may qualify at the partner level. The partnership must report these items separately when necessary so partners can calculate their deduction.
The partnership must also identify whether any of its trades or businesses are specified service trades or businesses (SSTBs) and disclose any aggregated trades or businesses.
Determine which Schedule K-1 items to include in QBI
The amounts a partnership or S corporation reports on Schedule K-1 as
QBI/Qualified PTP Items Subject to Taxpayer-Specific Determinations
don't automatically qualify for the QBI deduction. Review how each income, gain, deduction, or loss item appears on the federal income tax return to determine if you can include it in QBI. For example, you can generally include ordinary business income or loss in QBI if you use it to calculate taxable income and no other code section excludes, suspends, or disallows it.How UltraTax CS calculates the QBI deduction
UltraTax CS uses the partnership information to calculate the QBI deduction. You can generally deduct:
- Up to 20% of the net qualified business income (QBI)
- 20% of qualified REIT dividends (Section 199A dividends)
- 20% of qualified PTP income
When you report QBI amounts from partnerships or S corporations on the K1QBI screen, UltraTax CS allocates these items to the 1st unit only:
- Basis, at-risk and passive activity loss limitation and post 2017 carryovers.
- Section 179 expense deducted
- Dispositions of property with section 179 deductions (K1Sale screen)
- Section 1231 gain or loss when not included in capital gains and losses
- Depletion
- Section 59(e)(2) expenditures
- Pre-productive period expense deduction
- Reforestation expense deduction
- Dependent care benefits
- Unreimbursed partnership expenses
- Debt financed acquisition interest expense
- Deductible part of self-employment tax
- Self-employed health insurance deduction
- Self-employed SEP, SIMPLE, and qualified plans deduct
Report QBI on Form 8995 or 8995-A
Use Form 8995, Qualified Business Income Deduction Simplified Computation, when:
- The taxpayer has QBI, Section 199A dividends, or PTP income.
- Taxable income before the QBI deduction is $160,700 or less ($321,400 if married filing jointly, or $160,725 if married filing separately).
- The taxpayer isn’t a patron in a specified agricultural or horticultural cooperative.
Use Form 8995-A, Qualified Business Income Deduction, when the simplified form conditions aren't met.
note
Refer to the IRS instructions for more information about Form 8995 or Form 8995-A.
This article applies to:
- Product: UltraTax CS
- Return type: 1040 Individual