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Calculating the qualified business income deduction, section 199A, in ProConnect

SOLVEDby IntuitProConnect Tax51Updated July 14, 2022

The qualified business income deduction (QBI) allows eligible business owners and some trusts and estates to deduct up to 20% of their QBI, plus 20% of qualified real estate investment trust (REIT) dividends, and qualified publicly traded partnership (PTP) income.

Once the required steps are completed, Intuit ProConnect will calculate the QBI deduction and generate Form 8995 or 8995-A for the return.

  1. Under Income in the left-hand menu, select Business Income (Sch C) or Farm Income (Sch F) and enter income and expenses according to normal workflow.
  2. For each activity, click on the Qual. Bus. Inc. Deduction section along the top of your screen.
  3. Check the Specified service trade or business (SSTB) box, if applicable.
  4. Enter any amounts related to cooperatives that may apply:
    • DPAD received from a specified cooperative
    • QBI allocable to qualified payments received from cooperative
    • W-2 wages allocable to qualified payments received from cooperative
  5. Enter an Aggregate Tax Identification Number if you are aggregating this activity with others on the return.
    • Use the same Aggregate Tax Identification Number for each income activity you want aggregated together.
    • Enter a Description of aggregated businesses and explanation of how they are allowed to be aggregated, if applicable. You only need to enter this explanation on one activity in the aggregation.
    • Enter Explanation of change in aggregation from prior year, if applicable.

ProConnect doesn’t automatically include most Schedule E rentals in QBI calculations due to guidance in IRS Pub. 535. However, the program will calculate QBI for Schedule E activities marked as land, self-rentals, real estate professionals, or as claiming safe harbor.

  1. Under Income in the left-hand menu, select Rental and Royalty Income (Sch E) and enter information according to normal workflow.
  2. For each activity, click on the Qual. Bus. Inc. Deduction section from the dropdown menu in the upper-right corner of the input screen.
  3. Check the Specified service trade or business (SSTB) box, if applicable.
  4. Enter a number in Rental real estate enterprise number if claiming safe harbor, if applicable. This entry is required to generate a Section 199A Rental Real Estate Safe Harbor statement.
    • If you want to combine multiple Schedule E properties into one safe harbor statement, enter the same rental real estate enterprise number for each.
  5. Enter an Aggregate Tax Identification Number, if you are aggregating this activity with others on the return.
    • Use the same Aggregate Tax Identification Number for each income activity you want aggregated together.
    • Enter a Description of aggregated businesses and explanation of how they are allowed to be aggregated, if applicable. You only need to enter this explanation for one activity in the aggregation.
    • Enter Explanation of change in aggregation from prior year, if applicable.
  6. If the activities in Schedule E aren't land, a self-rental, a real estate professional, or claiming safe harbor, enter a 1 in Business is a qualified trade or business: 1=yes, 2=no [O] to force the QBI calculation.
  1. Under Schedule K, select Passthrough K-1's from the left menu.
  2. Enter K-1 information for the applicable activity following normal workflow.
  3. Follow the steps according to the return type:
    • Partnership and S-Corp K-1: select Line 20 from the dropdown menu in the top-right corner of the input screen and scroll down to Section 199A (QBI) Information (20).
    • Estate or Trust K-1: under Income in the left menu, select Passthrough K-1's. Then select Lines 12–20 from the dropdown menu in top-right corner of the input screen and scroll down to Other (20).
  4. Fill in the Section 199A grid with the information provided on the K-1.

These input fields are not overrides. The program assumes this activity qualifies when entries are made within this input section.

Where to see your results

Once the inputs are completed, ProConnect will automatically generate Form 8995 or Form 8995-A based on return requirements. The QBI deduction will flow to line 13 of Form 1040 or 1040-SR, or line 13a of Form 1040-NR.

Form 8995 or 8995-A are generated if:

  • The client has QBI, qualified REIT dividends, or qualified PTP income or loss; and
  • The client's taxable income before QBI deduction is at or below $163,300 ($326,600 if married filing jointly); or
  • Client is a patron in a specified agricultural or horticultural cooperative.

Assets missing from QBI calculation

This occurs when an asset is past its depreciable life. Per IRS Pub. 535, such an asset isn't included in the calculation of unadjusted basis immediately after acquisition (UBIA), which feeds into QBI.

QBI is being reduced by self-employment tax, health insurance, and retirement contribution deductions

Per Section 199A regulations, QBI is to be reduced by these amounts.

For QBI reported on a K-1, ProConnect assumes the entity issuing the K-1 has already reduced the QBI appropriately. If you feel QBI was misrepresented on the K-1, go to the appropriate schedule input screen and enter the QBI in the Qualified business income (QBI) (loss) [Override] to reduce QBI as needed.

Diagnostic(s) about attaching RRE Safe Harbor Statement(s) as PDF

If the following diagnostic, "Schedule E #X: The taxpayer claimed the safe harbor election for this rental property. Pursuant to IRS Rev. Proc. 2019-38, a statement PDF must be attached to the return stating that all qualifications for safe harbor were met. US - Ref #51860" is triggered, follow these steps to clear it.

  1. Generate a PDF of the statement, then attach the PDF.
  2. Under Client Information in the left-hand menu, select Electronic Filing and then select e-file PDF/Miscellaneous.
  3. Select e-file Attachment in the upper-right corner of the input screen.
  4. Click on the button Attach PDF and browse to your PDF copy of the signed Safe Harbor Election statement.
  5. Enter a description in the field Description of file.
  6. Using the dropdown in the field Link to form (defaults to main form), enter 67 and select 67=QBI Rental Real Estate Safe Harbor Statement.

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