What this line means
Your total qualified REIT dividends and publicly traded partnership (PTP) income for the year. Qualified REIT dividends are ordinary dividends from real estate investment trusts that are not capital gains or qualified dividends. PTP income is your share of ordinary income from a publicly traded partnership reported on Schedule K-1. 1
Does this apply to you?
- You received ordinary dividends from a REIT, shown in Box 5 of Form 1099-DIV
- You own shares in a publicly traded partnership and received a Schedule K-1 with ordinary income
- You have REIT dividends or PTP income passed through from a trust, estate, or other entity on a K-1
- You hold REIT investments in a taxable brokerage account (not inside an IRA or 401(k))
Easy to overlook
REIT dividends in a taxable account qualify even if you are not a business owner You do not need to run a business to claim a QBI deduction. If your only qualifying income is REIT dividends from a brokerage account, you still fill out Form 8995 and get up to 20% off those dividends. Many investors with no self-employment income skip this form entirely. 2 IRS Publication 535 — Qualified Business Income Deduction
Only the ordinary dividend portion qualifies — not capital gain distributions Your 1099-DIV may show REIT dividends in multiple boxes. Only the Section 199A dividends in Box 5 qualify for this deduction. Capital gain distributions (Box 2a) and qualified dividends (Box 1b) from REITs do not count as QBI. Using the wrong box overstates your deduction. 3 IRS Form 8995 Instructions — Line 5
Watch out for this
REIT dividends held inside a retirement account like an IRA or 401(k) do not qualify for the QBI deduction. The tax-advantaged wrapper already shelters that income. Only REIT dividends in taxable accounts produce Section 199A income. Filers sometimes add up all their REIT dividends across every account, including retirement accounts, which inflates line 5.
Footnotes
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IRS Form 8995 Instructions, Line 5. https://www.irs.gov/instructions/i8995 ↩
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IRS Publication 535, Business Expenses, Chapter 12 (Qualified Business Income Deduction) — REIT Dividends. https://www.irs.gov/pub/irs-pdf/p535.pdf ↩
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IRS Form 8995 Instructions, Line 5 — Qualified REIT Dividends. https://www.irs.gov/instructions/i8995 ↩