What this line means
Line 7 multiplied by 20%. This is the REIT/PTP portion of your total Section 199A deduction. If you had $50,000 in qualified REIT dividends and no PTP losses, this line is $10,000. This component is added to the QBI component on line 4 to produce your total deduction before the income limitation. 1
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Easy to overlook
REIT/PTP component is not subject to the W-2 wage limitation On the more complex Form 8995-A, the QBI deduction can be limited by W-2 wages paid and business property. The REIT/PTP component is never subject to these limitations — it is always a straight 20% of qualified REIT dividends and PTP income. This is one reason investors with REIT-heavy portfolios benefit from Section 199A. 2 IRS Publication 535 — Qualified Business Income Deduction
Mutual funds and ETFs can pass through Section 199A REIT dividends You do not need to own REITs directly. If your mutual fund or ETF holds REITs and passes through Section 199A dividends (reported in Box 5 of your 1099-DIV), those dividends qualify for this 20% calculation. Check your 1099-DIV even if you think you do not own any REITs. 3 IRS Form 8995 Instructions — Line 8
Watch out for this
Do not confuse total REIT dividends with qualified REIT dividends. Only the Section 199A dividends in Box 5 of Form 1099-DIV qualify. Total ordinary dividends from REITs (Box 1a) include amounts that are not eligible for the 20% deduction. Using Box 1a instead of Box 5 overstates this line.
Footnotes
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IRS Form 8995 Instructions, Line 8. https://www.irs.gov/instructions/i8995 ↩
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IRS Publication 535, Business Expenses, Chapter 12 (Qualified Business Income Deduction) — REIT Component. https://www.irs.gov/pub/irs-pdf/p535.pdf ↩
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IRS Form 8995 Instructions, Line 5 — Sources of Qualified REIT Dividends. https://www.irs.gov/instructions/i8995 ↩