Qualified Business Income Deduction - Pass-Through S Corporation Income

Per IRS Shareholder's Instructions for Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc. (For Shareholder's Use Only), on page 22:

Code V. Section 199A information. Generally, you may be allowed a deduction of up to 20% of your net qualified business income (QBI) plus 20% of your qualified REIT dividends, also known as section 199A dividends, and qualified publicly traded partnership (PTP) income from your S corporation. The S corporation will provide the information you need to figure your deduction. You will use one of these two forms to figure your QBI deduction.

  1. Use Form 8995, Qualified Business Income Deduction Simplified Computation, if:
    a. You have QBI, section 199A dividends, or PTP income (defined below),
    b. Your 2020 taxable income before the QBI deduction is equal to or less than $163,300 ($326,600 if married filing jointly), and
    c. You aren’t a patron in a specified agricultural or horticultural cooperative.
  2. Use Form 8995-A, Qualified Business Income Deduction, if you don’t meet all three of these requirements.

QBI pass-through entity reporting information. Use the information provided to you by your S corporation to complete the appropriate form identified above.

QBI or qualified PTP items subject to shareholder-specific determinations. The amounts reported to you reflect your pro rata share of items from the S corporation’s trade(s) or business(es), or aggregation(s), and may include items that aren’t includible in your calculation of the QBI deduction. When determining QBI or qualified PTP income, you must include only those items that are qualified items of income, gain, deduction, and loss included or allowed in determining taxable income for the tax year. To determine your QBI or your qualified PTP income amounts and for information on where to report them, see the instructions for Form 8995 or Form 8995-A.

To enter qualified business income in TaxAct:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Business Income in the Federal Quick Q&A Topics menu to expand, then click S Corporation income (Form 1120S Schedule K-1).
  3. Click + Add S Corporation Schedule K-1 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.
  5. On the screen titled S Corporation - Schedule K-1 Information, check Box 17 - Other information, then click Continue.
  6. On the screen titled S Corporation - Other Information, click Yes.
  7. On the screen titled S Corporation - Other Information - Box 17A - B, enter or review the appropriate information, then click Continue.

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