2020 Instructions for Form 8995 - IRS tax forms

1 2020 Department of the Treasury Internal Revenue Service Instructions for form 8995. Qualified Business Income Deduction Simplified Computation Section references are to the Internal Revenue Otherwise, use form 8995-A, Qualified deduction separately for the S and non-S. Code unless otherwise noted. Business Income Deduction, to figure your portions of the trust. The form 8995 used QBI deduction. to compute the S portion's QBI deduction Future Developments S corporations and partnerships. S. must be attached as a PDF to the ESBT. For the latest information about tax worksheet filed with form 1041. When corporations and partnerships aren't developments related to form 8995 and attached to the ESBT tax worksheet, the eligible for the deduction, but must pass its Instructions , such as legislation trust must show that the information is through to their shareholders or partners enacted after they were published, go to applicable to the S portion only, by writing the necessary information on an ESBT in the top margin of the form attachment to Schedule K-1.

2 See the 8995. See the Instructions for form 1041. Instructions for form 1120-S, Income What's New Tax Return for an S Corporation, and A method to track losses or deduc- form 1065, Return of Partnership Determining Your tions suspended by other provisions. Income. Qualified Trades or A worksheet is added to provide a Cooperatives. Cooperatives aren't Businesses reasonable method to track and compute eligible for the deduction. Instead, Your qualified trades and businesses your previously disallowed losses or cooperatives must provide the necessary include your domestic trades or deductions to be included in your qualified information to their patrons on form businesses for which you're allowed a business income deduction calculation for 1099-PATR or an attachment to help deduction for ordinary and necessary the year allowed.

3 See Tracking Losses or eligible patrons figure their deduction. business expenses under section 162. Deductions Suspended by Other Certain agricultural or horticultural However, trades or businesses conducted Provisions, later. cooperatives may qualify for a deduction by corporations and the performance of under section 199A(g). See the services as an employee aren't qualified General Instructions Instructions for form 1120-C, Income trades or businesses. Generally, specified Tax Return for Cooperative Associations, service trades or businesses (SSTBs). Purpose of form for rules applicable to agricultural and horticultural cooperatives. aren't qualified trades or businesses. However, all or a part of the SSTB may be Use form 8995 to figure your qualified Estates and trusts.

4 To the extent that a a qualified trade or business if your business income (QBI) deduction. grantor or another person is treated as taxable income is at or below the Individual taxpayers and some trusts and owning all or part of a trust or estate, the threshold or within the phase-in range. estates may be entitled to a deduction of up to 20% of their net QBI from a trade or owner will compute its QBI deduction for As provided in section 162, an activity business, including income from a the portioned owned as if section 199A qualifies as a trade or business if your pass-through entity, but not from a C items had been received directly by the primary purpose for engaging in the corporation, plus 20% of qualified real owner.

5 Generally, a non-grantor trust or activity is for income or profit and you're estate investment trust (REIT) dividends estate may either claim the QBI deduction involved in the activity with continuity and and qualified publicly traded partnership or provide information to their regularity. (PTP) income. However, your total QBI beneficiaries. In determining the QBI. deduction is limited to 20% of your taxable deduction or the information that must be For purposes of section 199A, if you income, calculated before the QBI provided to beneficiaries, the estate or own an interest in a pass-through entity, deduction, minus net capital gain. trust allocates section 199A items based the trade or business determination is on the relative proportion of the estate's or made at the entity level.

6 Material Who Can Take the trust's distributable net income (DNI) for participation under section 469 isn't the tax year distributed (or required to be required to qualify for the QBI deduction. Deduction distributed) to the beneficiary or retained Eligible taxpayers with income from a Individuals and eligible estates and trusts by the estate or trust. If the estate or trust trade or business may be entitled to the that have QBI use form 8995 to figure the has no DNI for the tax year, section 199A QBI deduction if they otherwise satisfy the QBI deduction if: items are allocated entirely to the estate or requirements of section 199A. You have QBI, qualified REIT trust. dividends, or qualified PTP income or loss The ownership and rental of real Although estates and trusts may property may constitute a trade or (all defined later), compute their own QBI deduction, to the Your 2020 taxable income before your extent section 199A items are allocable to business if it meets the standard QBI deduction is less than or equal to described above.

7 Also, Revenue the estate or trust, section 199A items Procedure 2019-38 provides a safe harbor $163,300 if single, married filing allocated to beneficiaries aren't includible separately, head of household, qualifying under which a rental real estate enterprise in the estate's or trust's QBI deduction will be treated as a trade or business for widow(er), or are a trust or estate computation. See the Instructions for form ($326,600 if married filing jointly), and purposes of the QBI deduction. Rental real 1041, Income Tax Return for Estates You aren't a patron in a specified and Trusts. estate that doesn't meet the requirements agricultural or horticultural cooperative. of the safe harbor may still be treated as a Electing Small Business Trusts trade or business for purposes of the QBI.

8 (ESBT). An ESBT must compute the QBI deduction if it's a section 162 trade or business. Feb 08, 2021 Cat. No. 69662S. The rental or licensing of property to a Exception 1: If your 2020 taxable file a Schedule B ( form 8995-A), attach commonly controlled trade or business income before the QBI deduction is less your RPE's aggregation statement(s), to operated by an individual or a than or equal to $163,300 if single, your form 8995-A. pass-through entity is considered a trade married filing separately, head of Your aggregations must be reported or business under section 199A. household, qualifying widow(er), or are a consistently for all subsequent years, trust or estate ($326,600 if married filing unless there is a significant change in Services performed as an employee jointly), your SSTB is treated as a qualified facts and circumstances that disqualify the excluded from qualified trades or busi- trade or business.

9 Aggregation. nesses. The trade or business of performing services as an employee isn't Exception 2: If your taxable income a trade or business for purposes of section before the QBI deduction is more than Note. You must combine the QBI, W-2. 199A. Therefore, any amounts reported $163,300 but not more than $213,300 if wages, and Unadjusted Basis on form W-2, box 1, other than amounts single, married filing separately, head of Immediately after Acquisition (UBIA) of reported in box 1 if Statutory Employee household, qualifying widow(er), or are a qualified property for all aggregated trades on form W-2, box 13, is checked, aren't trust or estate ($326,600 and $426,600 if or businesses, for purposes of applying QBI. If you were previously an employee married filing jointly), an applicable the W-2 wages and UBIA of qualified of a business and continue to provide percentage of your SSTB is treated as a property limits.

10 However, these limits substantially the same services to that qualified trade or business, you must won't apply until your income, before the business after you're no longer treated as complete Schedule A ( form 8995-A). QBI deduction, is more than the threshold. an employee, there is a presumption that If your income is more than the threshold, Aggregation. If you're engaged in more you must use form 8995-A. you're providing services as an employee than one trade or business, each trade or for purposes of section 199A for the business is a separate trade or business 3-year period after ceasing to be an for purposes of section 199A. However, Determining Your employee. You can rebut this presumption you may choose to aggregate multiple Qualified Business Income on notice from the IRS by providing trades or businesses into a single trade or Your QBI includes qualified items of records such as contracts or partnership business for purposes of figuring your income, gain, deduction, and loss from agreements that corroborate your status deduction, if you meet the following your trades or businesses that are as a non-employee.