What this line means
The smaller of line 9 or line 13. This comparison ensures your QBI deduction does not exceed 20% of your taxable income (net of capital gains). If line 9 is $16,000 but line 13 is $12,000, your deduction is capped at $12,000. If line 9 is $8,000 and line 13 is $20,000, you get the full $8,000. 1
Does this apply to you?
Easy to overlook
Most simplified-form filers are limited by line 9, not line 13 For the majority of filers using the simplified Form 8995, the QBI component (20% of business income) is smaller than the income limitation (20% of taxable income). The income limitation usually only bites when taxable income is low relative to QBI — for example, when large itemized deductions or other above-the-line deductions reduce taxable income well below business income. 2 IRS Publication 535 — Qualified Business Income Deduction
This line does not include the cooperative DPAD If you are a patron of an agricultural or horticultural cooperative, the domestic production activities deduction on line 15 is added after this comparison. The cooperative DPAD is not subject to the income limitation on line 13. 3 IRS Form 8995 Instructions — Line 14
Watch out for this
Skipping the comparison and using line 9 directly. Even on the simplified form, you must compare line 9 against line 13 and take the smaller amount. The income limitation exists to prevent the deduction from sheltering more than 20% of your non-capital-gain income. Ignoring this step overstates the deduction.
Footnotes
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IRS Form 8995 Instructions, Line 14. https://www.irs.gov/instructions/i8995 ↩
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IRS Publication 535, Business Expenses, Chapter 12 — Income Limitation. https://www.irs.gov/pub/irs-pdf/p535.pdf ↩
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IRS Form 8995 Instructions, Lines 14 and 15. https://www.irs.gov/instructions/i8995 ↩