What this line means
The sum of lines 4 and 8 — your QBI component plus your REIT/PTP component. This is the combined 20% deduction before applying the income limitation on lines 10 through 13 and before adding any cooperative DPAD on line 15. Think of it as your tentative deduction ceiling. 1
Does this apply to you?
- You have a positive QBI component on line 4, a REIT/PTP component on line 8, or both
- You are a business owner with pass-through income and also hold REIT investments
- You have only business income (line 8 is zero) or only REIT/PTP income (line 4 is zero)
- Both components are zero, making this line zero
Easy to overlook
This line combines two independent income streams The QBI component and the REIT/PTP component are calculated separately and never reduce each other. A loss in one pool does not offset the other pool’s 20% component. If your QBI component is zero because of a loss carryforward but your REIT/PTP component is $5,000, this line is $5,000. 2 IRS Publication 535 — Qualified Business Income Deduction
The income limitation on lines 10-13 may reduce this amount This line is not the final deduction. Lines 10 through 13 calculate 20% of your taxable income (minus capital gains), and your actual deduction cannot exceed that amount. If your taxable income is low relative to your QBI, the income limitation bites. 3 IRS Form 8995 Instructions — Line 9
Watch out for this
Do not transfer this amount directly to Form 1040 line 13a. You must complete lines 10 through 16 to determine the actual deduction. The income limitation (line 13) and the comparison on line 14 can reduce the final number below what appears here. Skipping ahead means you may claim too large a deduction.
Footnotes
-
IRS Form 8995 Instructions, Line 9. https://www.irs.gov/instructions/i8995 ↩
-
IRS Publication 535, Business Expenses, Chapter 12 (Qualified Business Income Deduction). https://www.irs.gov/pub/irs-pdf/p535.pdf ↩
-
IRS Form 8995 Instructions, Lines 10 through 13 — Income Limitation. https://www.irs.gov/instructions/i8995 ↩