Updated October 7, 2026. Quick answer: Form 8995 is the simplified way to claim the qualified business income deduction, which is up to 20% of net QBI plus 20% of qualified REIT dividends and PTP income. It is for 2025 taxable income before the deduction of $197,300 or less, or $394,600 or less if married filing jointly. Above those amounts, or for patrons of certain cooperatives, Form 8995-A applies and W-2 wage and property limits can reduce the deduction. The total is also capped at 20% of taxable income less net capital gain.
More IRS forms and schedules for individual filers, read line by line: Form 3800 instructions.
More IRS forms for employers and business owners, read line by line: Form 8995-A Schedule A and Form 8995-A Schedule D.
Read box by box from the IRS form text: Form 1099-PATR boxes explained, Form 1099-PATR boxes 6 to 9 and Form 1099-PATR boxes 10 to 13.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S lines 23 to 28, Form 1120-S Schedule K lines 17 and 18 and Form 1120-S Schedule M-1.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 Schedule M-1.
Business use of your home (Form 8829), the saver’s credit (Form 8880), clean vehicle credits (Form 8936) and amended returns (Form 1040-X), read line by line: Form 1040-X lines 4a to 5.
Sales of business property (Form 4797), passive activity losses (Form 8582) and depreciation (Form 4562) for 2025, read line by line: Form 4562 lines 1 to 5.
Schedule C and Schedule SE (Form 1040) for 2025, read line by line: Schedule C lines 12 and 13.
Related reading on this site: Form 8995-A QBI deduction.
Form 1040 for 2025, lines 12 to 38 read line by line: Form 1040 line 13 and Form 1040 lines 14 and 15.
More IRS forms and schedules, read line by line: Form 1065 instructions.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 box 13, Schedule K-1 boxes 18 and 19 and Schedule K-1 box 17 code V.
The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 box 11.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 12, Schedule K-1 box 14 and Schedule K-1 box 20 code Z.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 1 and Schedule K-1 box 4.
What the deduction is
“Use Form 8995 to figure your qualified business income (QBI) deduction.” The size is set out in the same paragraph: “Individual taxpayers and some trusts and estates may be entitled to a deduction of up to 20% of their net QBI from a trade or business, including income from a pass-through entity, but not from a C corporation, plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.”
A ceiling applies on top: “your total QBI deduction is limited to 20% of your taxable income, calculated before the QBI deduction, minus net capital gain (increased by any qualified dividends).” The year-by-year threshold figures are tracked on the 2026 QBI thresholds page.
Form 8995 or Form 8995-A
The choice turns on taxable income before the deduction. Form 8995 is used if “Your 2025 taxable income before your QBI deduction is less than or equal to $394,600 if married filing jointly, and $197,300 for all other returns” and the filer is not a patron of a specified agricultural or horticultural cooperative. “Otherwise, use Form 8995-A, Qualified Business Income Deduction, to figure your QBI deduction.”
| Filing status | Form 8995 range | Phase-in range for 8995-A |
|---|---|---|
| Single, head of household, and all other returns | $197,300 or less | $197,300 to $247,300 |
| Married filing jointly | $394,600 or less | $394,600 to $494,600 |
The Form 8995-A instructions state the other side: “Your 2025 taxable income before your QBI deduction is more than $394,600 married filing jointly, and $197,300 for all other returns”.
What counts as QBI
“Your QBI includes qualified items of income, gain, deduction, and loss from your trades or businesses that are effectively connected with the conduct of a trade or business in the United States.” Several items are excluded. Among them: “Wage income (except “Statutory Employees” where Form W-2, box 13, is checked).” “Amounts received as reasonable compensation from an S corporation.” “Amounts received as guaranteed payments.” The list also removes capital gains, dividends, and interest not allocable to a business.
Service businesses get special treatment. “Generally, specified service trades or businesses (SSTBs) aren’t qualified trades or businesses.” The fields include health, law, accounting, consulting, financial services, and investing. Exception 1 keeps an SSTB qualified at or below the threshold, and between the threshold and the top of the phase-in range “an applicable percentage of your SSTB is treated as a qualified trade or business”. Rental real estate may qualify as well: “The ownership and rental of real property may constitute a trade or business if it meets the standard described above.” See the Schedule K-1 box 14 code I page for trust and estate amounts.
Form 8995 line by line
| Line | Entry |
|---|---|
| 1 and 2 | QBI or loss for each trade or business, combined |
| 3 | Qualified business net loss carryforward from the prior year |
| 4 | Lines 2 and 3 combined; zero if a loss |
| 5 | QBI component: line 4 times 20% |
| 6 to 8 | Qualified REIT dividends and PTP income, with prior carryforward |
| 9 | REIT and PTP component: line 8 times 20% |
| 10 | Add lines 5 and 9 |
| 11 to 14 | Taxable income before QBI, less net capital gain, times 20% |
| 15 | Smaller of line 10 or line 14 |
| 16 and 17 | Loss carryforwards to next year |
Line 11 for most filers is “Form 1040 or 1040-SR, line 11a, minus lines 12e and 13b.” The result of line 15 “Enter this amount on your Form 1040, 1040-SR, or Form 1040-NR, line 13a”.
Worked example: lines 4 to 15
Assume QBI of $100,000 from one sole proprietorship and no carryforwards. Taxable income before the deduction is $150,000 including $10,000 of net capital gain and qualified dividends. The filer is single and $150,000 is below $197,300 so Form 8995 applies. Line 5 is 20% of $100,000 and equals $20,000. Line 13 is computed as $150,000 minus $10,000 and equals $140,000. Line 14 is 20% of $140,000 and equals $28,000. Line 15 is the smaller of $20,000 and $28,000 so the deduction is $20,000. All amounts here are assumed and worked from the form lines; the IRS does not print this example.
Losses, REIT dividends, and PTP income
A net loss does not produce a deduction: “If you have a qualified business net loss for the year, you don’t qualify for the QBI deduction unless you have qualified REIT dividends or qualified PTP income.” “The loss will be carried forward to next year.” Line 16 repeats it: “This amount will offset QBI in later tax years regardless of whether the trade(s) or business(es) that generated the loss is still in existence.”
REIT amounts come from the dividend statement: “Qualified REIT dividends include any dividends you received from a REIT held for more than 45 days” and “This amount is reported to you on Form 1099-DIV, line 5.” The box is explained on the Form 1099-DIV box 5 page. REIT and PTP losses carry forward separately on line 17.
Form 8995-A and the W-2 wage limits
Above the threshold the QBI component is reduced for each business. “your QBI for each of your trades or businesses may be partially or fully reduced to the greater of 50% of W-2 wages paid by the qualified trade or business, or 25% of W-2 wages plus 2.5% of the UBIA of qualified property from the qualified trade or business.”
The reduction depends on where income falls: “At or below the threshold, you don’t need to reduce your QBI”, phased in across the range, and applied in full above it. Form 8995-A also carries Schedules A through D for SSTBs, aggregation, loss netting, and cooperative patrons. Owner pay choices that change wages are discussed on the S corporation election calculator.
Which revision applies
The edition read for this page is the 2025 Form 8995 instructions, dated Jan 26, 2026, and the 2025 Form 8995-A instructions, which were the revisions irs.gov served when they were read on 2026-10-07 and which apply to returns filed in 2026. A later revision can change the threshold amounts, so check the form in use. “For the latest information about developments related to Form 8995 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form8995.”
Common mistakes
- Using Form 8995 when taxable income before the deduction is over $197,300 ($394,600 if married filing jointly). The instructions send those filers to Form 8995-A.
- Counting W-2 wages, S corporation reasonable compensation, or guaranteed payments as QBI. The instructions exclude all three.
- Dropping a net QBI loss. It is carried forward on line 16 and offsets QBI in later years.
Related: QBI deduction thresholds 2026, QBI deduction thresholds 2027, Form 1099-DIV box 5, and solo 401(k) vs SEP IRA for sole proprietors.
Sources
- Instructions for Form 8995 (2025): https://www.irs.gov/pub/irs-pdf/i8995.pdf
- Instructions for Form 8995-A (2025): https://www.irs.gov/pub/irs-pdf/i8995a.pdf
- Form 8995 (2025): https://www.irs.gov/pub/irs-pdf/f8995.pdf
Read from the IRS documents linked above on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.