QBI Loss Carryforward

[Sirius]

Hi Everyone,

I'm trying to better understand how a "QBI Loss Carryforward" that shows up on form 8995 from the prior year impacts current year taxable income. Please assume the following.

QBI Loss Carryforward from 2022: ($42K)

2023 Net Income from K-1: $58K

I entered the carryforward loss into Income > Net Operating Loss > Federal Net Operating Loss > Qualified Business Loss Carryover.

By doing this it actually lowers the QBI deduction the client is able to take. As the loss only shows up on one form (8995, line 3). Am I wrong in expecting this loss to be applied against the 2023 Net Income on the K-1 somewhere else on the return? Lowering their business income to $16K?

Thanks in advance!

[IRonMaN · Accepted solution]

Unless the losses were suspended due to basis or passive issues, they wouldn't offset this year's K-1 income - you would already have taken the losses in previous years.

[Sirius]

Thanks. I'm trying to think of a scenario where you would take losses in a given year, but not take those same losses on form 8995? How is there a carryover on form 8995, but not anywhere else?

[Terry53029]

A QBI loss is carried forward indefinitely, and is only used to offset a positive QBI. Has nothing to do with income in current year. 

[Sirius]

Thanks! I think I see what has happened now. The W-2 income my client had in prior years absorbed the entire business operating loss that would've shown up on Schedule 1.

Example 1040

W-2 Income:  $80K

Additional Income from Schedule 1: ($50K)

AGI:  $30K

Example 8995

Total QBI from S-Corp: ($50K)

QBI Deduction: $0

QBI Carryforward: ($50K)

Sorry guys. Have to spell this out, otherwise I won't remember it the next time it happens. Appreciate the help!