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How is QBI determined?

The 20 percent QBI deduction is based on qualifying business income from a sole proprietorship, partnership, S corporation, trust or estate, farm, and certain rental property. The amount of the deduction can be further limited if the taxpayer’s income exceeds the inflation-adjusted threshold established for that tax year.

While normally figured on Form 1040, the IRS has two forms to help taxpayers calculate QBI:

  • Form 8995, Qualified Business Income Deduction Simplified Computation
  • Form 8995-A, Qualified Business Income Deduction

The instructions for Forms 8995 and 8995-A explain who can claim the deduction, how to determine qualifying businesses and income, specific exclusions, and more.

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Drake Software Blog Team

The Drake Software Blog Team is proud to cover the latest in tax-industry-related news, from tax law and IRS updates to technology and business strategies. If you have questions about an article or just want to reach out to our staff, email comments@taxingsubjects.com.