The qualified business income deduction (QBI) is intended to reduce the tax rate on qualified business income to a rate that is closer to the new corporate tax rate. There are two ways to calculate the QBI deduction: using Form 8995 or Form 8995-A. Don’t worry about which form your return needs to use. After you complete the required steps, Lacerte will generate the correct forms for your return. All the information you need to help the program calculate the QBI deduction for you is contained in this article.
First, follow the steps for each of the relevant schedules listed below for your client’s return.
Where to see your results
Once you’ve completed the steps in each of the relevant schedules for your client’s return, you’re done. The program will automatically generate Form 8995 or Form 8995-A based on what’s required for your client’s return. The QBI deduction will flow to line 10 of Form 1040 or 1040-SR, or line 38 of Form 1040-NR.
You’ll see Form 8995-A and accompanying schedules if:
- You have QBI, qualified REIT dividends, or qualified PTP income or loss; and
- Your 2019 taxable income before your QBI deduction is more than $160,700 ($160,725 if married filing separately or a married nonresident alien; $321,400 if married filing jointly); or
- You’re a patron in a specified agricultural or horticultural cooperative.
If you don't meet those requirements to file Form 8995-A, your deduction is figured on Form 8995 instead. Form 8995-A and its supporting schedules, like Schedule B Aggregation of Business Operations, won't be completed since they aren't required to file the return. See the IRS Instructions for Form 8995-A for more information.