Page 190 - Small Business IRS Training Guides

Qualified Business Income Deduction

WHO MAY TAKE THE DEDUCTION?

INDIVIDUALS

Individuals with QBI, REIT dividends or PTP income may take a QBI deduction. See

How to Figure the Deduction for more detailed information.

S CORPORATIONS AND PARTNERSHIPS

S corporations and partnerships are not eligible for the deduction. Instead, the

deduction is determined at the shareholder or partner level. S corporations and

partnerships must pass-through the necessary information to their shareholders or
partners, so they may figure their deduction. This includes passing through the IRC

199A items reported to the pass-through by a lower-tier entity. S corporations and

partnerships are required to report each shareholder’s or partner’s share of the following

items separately for each trade or business (an entity may have more than one trade or

business) engaged in by the entity on an attachment to Schedule K-1.

• Section 199A QBI*.
• Section 199A W-2 wages.

• Section 199A UBIA of qualified property.

• Section 199A Qualified REIT dividends.

• Section 199A Qualified PTP income*.

• QBI allocable to a qualified payment received from a specified agricultural or

horticultural cooperative.

• Passed-through domestic production activities deduction under section 199A(g)
from a specified agricultural or horticultural cooperative.
• Whether each trade or business is a specified service trade or business.

• Disclosure of information for aggregated trades or businesses.

*Note: A section 199A QBI and qualified PTP income amount was required in 2018.

However, it was later determined that reporting just this item did not provide enough

information to the shareholder or partner to determine their QBI or qualified PTP
income, as the determination as to whether a separately stated item qualifies as QBI or

qualified PTP income is determined at the shareholder level. Therefore, the

S corporation’s and partnership’s instructions were updated in 2019 to require that each
separately stated item that may potentially qualify as QBI or qualified PTP income be

reported to the shareholder or partner.

A partnership or S corporation engaged in more than one trade or business may choose

to aggregate multiple trades or businesses into a single trade or business for purposes

of IRC § 199A if it meets the aggregation requirements, see Aggregation of Business

Operations. The pass-through entity’s aggregations must be reported consistently for all

subsequent years, unless there is a change in facts and circumstances that disqualify
the aggregation. Failure to disclose the aggregations can cause them to be
disaggregated.
May 2019

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