i8995--2021 draft

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2021

Department of the Treasury
Internal Revenue Service

Instructions for Form 8995
Qualified Business Income Deduction Simplified Computation

DRAFT AS OF
September 9, 2021

Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

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.

What’s New

A method to track losses or deductions suspended by other provisions.
A worksheet is added to provide a
reasonable method to track and compute
your previously disallowed losses or
deductions to be included in your qualified
business income deduction calculation for
the year allowed. See Tracking Losses or
Deductions Suspended by Other
Provisions, later.

General Instructions
Purpose of Form

Use Form 8995 to figure your qualified
business income (QBI) deduction.
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. However, your total QBI
deduction is limited to 20% of your taxable
income, calculated before the QBI
deduction, minus net capital gain.

Who Can Take the
Deduction

Individuals and eligible estates and trusts
that have QBI use Form 8995 to figure the
QBI deduction if:
• You have QBI, qualified REIT
dividends, or qualified PTP income or loss
(all defined later),
• Your 2021 taxable income before your
QBI deduction is less than or equal to
$164,900 if single, head of household,
qualifying widow(er), or are a trust or
estate, $164,925 if married filing
separately, or $329,800 if married filing
jointly,
• You aren’t a patron in a specified
agricultural or horticultural cooperative.

Sep 03, 2021

Otherwise, use Form 8995-A, Qualified
Business Income Deduction, to figure your
QBI deduction.

S corporations and partnerships. S
corporations and partnerships aren’t
eligible for the deduction, but must pass
through to their shareholders or partners
the necessary information on an
attachment to Schedule K-1. See the
Instructions for Form 1120-S, U.S. Income
Tax Return for an S Corporation, and
Form 1065, U.S. Return of Partnership
Income.

Cooperatives. Cooperatives aren’t
eligible for the deduction. Instead,
cooperatives must provide the necessary
information to their patrons on Form
1099-PATR or an attachment to help
eligible patrons figure their deduction.
Certain agricultural or horticultural
cooperatives may qualify for a deduction
under section 199A(g). See the
Instructions for Form 1120-C, U.S. Income
Tax Return for Cooperative Associations,
for rules applicable to agricultural and
horticultural cooperatives.
Estates and trusts. To the extent that a
grantor or another person is treated as
owning all or part of a trust or estate, the
owner will compute its QBI deduction for
the portioned owned as if section 199A
items had been received directly by the
owner. Generally, a non-grantor trust or
estate may either claim the QBI deduction
or provide information to their
beneficiaries. In determining the QBI
deduction or the information that must be
provided to beneficiaries, the estate or
trust allocates section 199A items based
on the relative proportion of the estate's or
trust's distributable net income (DNI) for
the tax year distributed (or required to be
distributed) to the beneficiary or retained
by the estate or trust. If the estate or trust
has no DNI for the tax year, section 199A
items are allocated entirely to the estate or
trust.
Although estates and trusts may
compute their own QBI deduction, to the
extent section 199A items are allocable to
the estate or trust, section 199A items
allocated to beneficiaries aren’t includible
in the estate’s or trust’s QBI deduction
computation. See the Instructions for Form
1041, U.S. Income Tax Return for Estates
and Trusts.
Electing Small Business Trusts
(ESBT). An ESBT must compute the QBI
Cat. No. 69662S

deduction separately for the S and non-S
portions of the trust. The Form 8995 used
to compute the S portion’s QBI deduction
must be attached as a PDF to the ESBT
tax worksheet filed with Form 1041. When
attached to the ESBT tax worksheet, the
trust must show that the information is
applicable to the S portion only, by writing
“ESBT” in the top margin of the Form
8995. See the Instructions for Form 1041.

Determining Your
Qualified Trades or
Businesses

Your qualified trades and businesses
include your domestic trades or
businesses for which you’re allowed a
deduction for ordinary and necessary
business expenses under section 162.
However, trades or businesses conducted
by corporations and the performance of
services as an employee aren’t qualified
trades or businesses. Generally, specified
service trades or businesses (SSTBs)
aren’t qualified trades or businesses.
However, all or a part of the SSTB may be
a qualified trade or business if your
taxable income is at or below the
threshold or within the phase-in range.
As provided in section 162, an activity
qualifies as a trade or business if your
primary purpose for engaging in the
activity is for income or profit and you’re
involved in the activity with continuity and
regularity.
For purposes of section 199A, if you
own an interest in a pass-through entity,
the trade or business determination is
made at the entity level. Material
participation under section 469 isn’t
required to qualify for the QBI deduction.
Eligible taxpayers with income from a
trade or business may be entitled to the
QBI deduction if they otherwise satisfy the
requirements of section 199A.
The ownership and rental of real
property may constitute a trade or
business if it meets the standard
described above. Also, Rev. Proc.
2019-38 provides a safe harbor under
which a rental real estate enterprise will be
treated as a trade or business for
purposes of the QBI deduction. Rental real
estate that doesn’t meet the requirements
of the safe harbor may still be treated as a
trade or business for purposes of the QBI
deduction if it’s a section 162 trade or
business.

The rental or licensing of property to a
commonly controlled trade or business
operated by an individual or a
pass-through entity is considered a trade
or business under section 199A.
Services performed as an employee
excluded from qualified trades or businesses. The trade or business of
performing services as an employee isn’t
a trade or business for purposes of section
199A. Therefore, any amounts reported
on Form W-2, box 1, other than amounts
reported in box 1 if “Statutory Employee”
on Form W-2, box 13, is checked, aren’t
QBI. If you were previously an employee
of a business and continue to provide
substantially the same services to that
business after you’re no longer treated as
an employee, there is a presumption that
you’re providing services as an employee
for purposes of section 199A for the
3-year period after ceasing to be an
employee. You can rebut this presumption
on notice from the IRS by providing
records such as contracts or partnership
agreements that corroborate your status
as a non-employee.
For more information on if you’re an
employee or an independent contractor,
see Pub. 15-A, Employer’s Supplemental
Tax Guide, and Pub. 1779, Independent
Contractor or Employee.

Exception 1: If your 2021 taxable
income before the QBI deduction is less
than or equal to $164,900 if single, head of
household, qualifying widow(er), or are a
trust or estate, $164,925 if married filing
separately , or $329,800 if married filing
jointly, your SSTB is treated as a qualified
trade or business.
Exception 2: If your taxable income
before the QBI deduction is more than
$164,900 but not more than $214,900 if
single, head of household, qualifying
widow(er), or are a trust or estate, is more
than $164,925 but not more than
$214,925 if married filing separately , and
is more than $329,800 but not more than
$429,800 if married filing jointly, an
applicable percentage of your SSTB is
treated as a qualified trade or business,
you must complete Schedule A (Form
8995-A).

statement(s) to your Schedule B (Form
8995-A).
If you’re not making an aggregation
election and are therefore not required to
file a Schedule B (Form 8995-A), attach
your RPE’s aggregation statement(s), to
your Form 8995-A.
Your aggregations must be reported
consistently for all subsequent years,
unless there is a significant change in
facts and circumstances that disqualify the
aggregation.

DRAFT AS OF
September 9, 2021

SSTBs excluded from your qualified
trades or businesses. An SSTB is
generally excluded from the definition of
qualified trade or business.
An SSTB is any trade or business
providing services in the fields of:
• Health;
• Law;
• Accounting;
• Actuarial science;
• Performing arts;
• Consulting;
• Athletics;
• Financial services;
• Brokerage services;
• Investing and investment management;
• Trading or dealing in securities,
partnership interests, commodities; or
• Any trade or business where the
principal asset is the reputation or skill of
one or more of its employees or owners,
as demonstrated by:
–Receiving fees, compensation, or
other income for endorsing products
or services;
–Licensing or receiving fees,
compensation or other income for the
use of taxpayer’s image, likeness,
name, signature, voice, trademark, or
any other symbols associated with the
individual’s identity; or
–Receiving fees, compensation, or
other income for appearing at an
event or on radio, television, or
another media format.

Aggregation. If you’re engaged in more
than one trade or business, each trade or
business is a separate trade or business
for purposes of section 199A. However,
you may choose to aggregate multiple
trades or businesses into a single trade or
business for purposes of figuring your
deduction, if you meet the following
requirements.
1. You or a group of persons directly
or indirectly own 50% or more of each
trade or business for the majority of the tax
year, including the last day of the tax year,
and all trades or businesses use the same
tax year end;
2. None of the trades or businesses
are an SSTB and
3. The trades or businesses meet at
least two of the following factors:
a. They provide products, property, or
services that are the same or that are
customarily offered together.
b. They share facilities or share
significant centralized business elements
such as personnel, accounting, legal,
manufacturing, purchasing, human
resources, or information technology
resources.
c. They are operated in coordination
with, or reliance on, one or more of the
businesses in the aggregated group.
If a relevant pass-through entity (RPE)
aggregates multiple trades or businesses,
you may not separate the trades or
businesses aggregated by the RPE, but
you may add additional trades or
businesses to the aggregation, if the rules
above are met.
If you choose to aggregate multiple
trades or businesses, including or apart
from any aggregations made by an RPE,
complete Schedule B (Form 8995-A)
before starting Part I of Form 8995-A. You
must attach any RPE aggregation

-2-

Note. You must combine the QBI, W-2
wages, and Unadjusted Basis
Immediately after Acquisition (UBIA) of
qualified property for all aggregated trades
or businesses, for purposes of applying
the W-2 wages and UBIA of qualified
property limits. However, these limits
won’t apply until your income, before the
QBI deduction, is more than the threshold.
If your income is more than the threshold,
you must use Form 8995-A.

Determining Your
Qualified Business Income

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.
This includes qualified items from
partnerships (other than PTPs), S
corporations, sole proprietorships, and
certain estates and trusts that are allowed
in calculating your taxable income for the
year.
To figure the total amount of QBI, you
must consider all items that are
attributable to the trade or business. This
includes, but isn’t limited to, unreimbursed
partnership expenses, business interest
expense, deductible part of
self-employment tax, self-employment
health insurance deduction, and
contributions to qualified retirement plans.
QBI doesn’t include any of the following:
• Items that aren’t properly included in
income.
• Income that isn’t effectively connected
with the conduct of a trade or business
within the United States (go to IRS.gov/
ECI).
• 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.
• Amounts received as payments by a
partner for services other than in a
capacity as a partner.
• Items treated as capital gains or losses
under any provision of the Internal
Revenue Code (Code).
• Dividends and dividend equivalents.
Instructions for Form 8995 (2021)

• Interest income not properly allocable
to a trade or business.
• Commodities transactions or foreign
currency gains or losses.
• Income, loss, or deductions from
notional principal contracts.
• Annuities (unless received in
connection with the trade or business).
• Qualified REIT dividends.
• Qualified PTP income.

deduction is no longer suspended. For an
example of a reasonable method to track
and compute the amount of previously
disallowed losses or deductions to be
included in your QBI deduction calculation
in the year allowed, see Tracking Losses
or Deductions Suspended by Other
Provisions, later.

the patron reduction and use Form 8995-A
to compute your QBI deduction.
Determining if items on Schedule C
(Form 1040) are included in QBI. The
net gain or loss reported on your
Schedule C (Form 1040) isn’t
automatically included in your QBI. See
the QBI Flow Chart, later, to figure if an
item of income, gain, deduction, or loss is
included in QBI.

DRAFT AS OF
September 9, 2021

See the QBI Flow Chart, later, to figure
if an item of income, gain, deduction, or
loss is included in QBI.

Losses or deductions from a qualified
trade or business that are suspended by
other provisions of the Internal Revenue
Code are not qualified losses or
deductions and, therefore, are not
included in your QBI for the year. Such
Code provisions include, but aren’t limited
to, sections 163(j), 179, 461(l), 465, 469,
704(d), and 1366(d). Instead, qualified
losses and deductions are taken into
account in the tax year they’re included in
calculating your taxable income.

When losses or deductions are
suspended, you must determine the
qualified portion of the losses or
deductions that must be included in QBI in
subsequent years when allowed in
calculating your taxable income. In
general, losses and deductions incurred
prior to 2018 are not qualified losses or
deductions and are not included in QBI in
the year they are included in calculating
taxable income.
If a loss or deduction is partially
suspended, only the portion of the allowed
loss or deduction attributable to QBI must
be considered when determining QBI from
the trade or business in the year the loss
or deduction is incurred. The portion of the
allowed loss or deduction attributable to
QBI is determined by first calculating the
percentage of the total loss attributable to
QBI by dividing the portion of the total loss
attributable to QBI by the overall total loss.
The allowed loss or deduction is then
multiplied by this percentage to determine
the portion of the allowed loss or
deduction attributable to QBI.
If your trade or business is an SSTB,
whether the trade or business is a
qualified trade or business is determined
based on your taxable income in the year
the loss or deduction is incurred. If your
taxable income is within the phase-in
range in that year, you must determine
and apply the applicable percentage in the
year the loss or deduction was incurred to
determine the qualified portion of the
suspended loss or deduction.
Losses and deductions retain their
status as either qualified or non-qualified
from year to year while suspended.
Therefore, you must track each category
of loss or deduction until the loss or
Instructions for Form 8995 (2021)

When losses or deductions previously
suspended by other Code provisions are
allowed in calculating taxable income, the
qualified portion of the loss or deduction
allowed under each provision is treated as
a qualified net loss carryforward from a
separate trade or business when
calculating the current year’s QBI
deduction. See Line 3.
Any qualified loss or deduction from an
SSTB allowed in calculating taxable
income aren’t included on the Schedule A
(Form 8995-A) as the applicable
percentage was previously determined
and applied in the year the loss or
deduction was incurred and should not be
redetermined in the year the loss or
deduction is allowed.

Determining if items included on
Schedule K-1 are included in QBI. The
amounts reported on your Schedule K-1
as “QBI/Qualified PTP Items Subject to
Taxpayer-Specific Determinations” from a
partnership, S corporation, estate, or trust
aren’t automatically included in your QBI.
To figure if the item of income, gain,
deduction, or loss is included in QBI, you
must look to how it’s reported on your
federal income tax return. For example,
ordinary business income or loss is
generally included in QBI if it was used in
computing your taxable income, not
excluded, suspended, or disallowed under
any other section of the Code. Also, a
section 1231 gain or loss is only includible
in QBI if it isn’t capital gain or loss. See the
QBI Flow Chart, later, to figure if an item of
income, gain, deduction, or loss is
included in QBI.
Determining if information reported on
your Form 1099-PATR is included in
QBI. The amounts reported to you as
your share of patronage dividends and
similar payments on Form 1099-PATR
aren’t automatically included in your QBI.
Payments may be included in QBI to the
extent they are (1) related to your trade or
business, (2) reported to you by the
cooperative as qualified income items on
an attachment to Form 1099-PATR, and
(3) not payments reported as from an
SSTB, unless your taxable income is at or
below the threshold, in which case
payments from SSTBs are included in
your QBI.
If you received qualified payments
reported to you on Form 1099-PATR from
a specified agricultural or horticultural
cooperative, you must reduce your QBI by
-3-

Determining Your
Qualified REIT Dividends
and Qualified PTP Income/
Loss

Qualified REIT dividends include any
dividends you received from a REIT held
for more than 45 days and for which the
payment isn’t obligated to someone else
and that isn’t a capital gain dividend or
qualified dividend, plus your qualified
REIT dividends received from a regulated
investment company (RIC). This amount is
reported to you on Form 1099-DIV, line 5.
Qualified PTP income or loss includes
your share of qualified items of income,
gain, deduction, and loss from a PTP. It
may also include gain or loss recognized
on the disposition of your partnership
interest that isn’t treated as a capital gain
or loss.
Note. PTP income generated by an SSTB
may be limited to the applicable
percentage or excluded if your taxable
income exceeds the threshold, in which
case you may need to complete Part II of
Schedule A (Form 8995-A). See the
Instructions for Form 8995-A for more
information.
When losses or deductions from a PTP
are suspended in the year incurred, you
must determine the qualified portion of the
losses or deductions that must be
included as qualified PTP losses or
deductions in subsequent years when
allowed in calculating your taxable
income. In general, losses and deductions
that were incurred prior to 2018 are not
qualified PTP losses or deductions and
are not included in calculating taxable
income.
If your PTP is an SSTB, whether the
PTP loss is a qualified loss is determined
based on your taxable income in the year
the loss or deduction is incurred. If your
taxable income is within the phase-in
range in that year, you must determine
and apply the applicable percentage in the
year the loss or deduction was incurred to
determine the qualified portion of the
suspended loss or deduction.
Losses and deductions retain their
status as either qualified or non-qualified
from year to year while suspended.
Therefore, you must track each loss or

deduction from a PTP until the loss or
deduction is no longer suspended.
When losses or deductions previously
suspended by other Code provisions are
allowed in calculating taxable income, the
qualified portion of the loss or deduction
allowed for each PTP is treated as a
qualified net loss carryforward from a
separate PTP when calculating the current
year’s QBI deduction. See Line 7.
Any qualified PTP loss or deduction
from an SSTB allowed in calculating
taxable income isn’t included on the
Schedule A (Form 8995-A) as the
applicable percentage was previously
calculated and applied in the year the loss
or deduction was incurred and should not
be redetermined in the year the loss or
deduction is allowed.

Line 3

Include here the qualified portion of trade
or business (loss) carryforward allowed in
calculating taxable income in the current
year, even if the loss was from a trade or
business that is no longer in existence.
See Determining Your Qualified Business
Income, earlier, and Tracking Losses or
Deductions Suspended by Other
Provisions, later. Losses and deductions
that remain suspended by other Code
provisions are not qualified losses and
deductions and must be tracked
separately for use when subsequently
allowed in calculating taxable income.

Line 12

Enter the amount from your tax return as
follows.
• Form 1040, 1040-SR, or 1040-NR,
line 3a, plus your net capital gain. If you’re
not required to file Schedule D (Form
1040), your net capital gain is the amount
reported on Form 1040, 1040-SR, or
1040-NR, line 7. If you file Schedule D
(Form 1040), your net capital gain is the
smaller of Schedule D (Form 1040),
line 15 or 16, unless line 15 or 16 is zero
or less, in which case nothing is added to
the qualified dividends.
• Form 1041, line 2b(2), plus your net
capital gain. For estates or trusts required
to file Schedule D (Form 1041), add the
qualified dividends to the smaller of
Schedule D (Form 1041), line 18a(2), or
line 19(2), unless either line 18a(2) or
19(2) is zero or less, in which case nothing
is added to the qualified dividends.
• Form 1041-N, line 2b, plus the smaller
of Form 1041-N, Schedule D, line 10 or
11, unless line 10 or 11 is zero or less, in
which case nothing is added to the
qualified dividends.
• Form 990-T filers who are trusts,
Schedule D (Form 1041), the smaller of
line 18a(2) or 19(2), unless either
line 18a(2) or 19(2) is zero or less, in
which case the net capital gain for
purposes of section 199A is zero.
• S-corporation portion of an ESBT, your
ESBT Tax Worksheet, line 2b, plus the
smaller of your ESBT’s Schedule D (Form
1041), line 18a(2) or 19(2) is zero or less,
in which case nothing is added to your
qualified dividends.

DRAFT AS OF
September 9, 2021

Specific Instructions
Line 1

If you aggregated multiple trades or
businesses into a single business, enter
the aggregation group name. For
example, Aggregation 1, 2, 3, etc., instead
of entering the business name, and leave
line 1(b) blank.
Note. If you aggregated trades or
businesses, you must attach Schedule B
(Form 8995-A) or similar schedule.
If you’re relying on the safe harbor
contained in Rev. Proc. 2019-38, enter
each enterprise as identified on the
statement required for use on the safe
harbor. For example, Enterprise 1, 2, 3,
etc.
Enter on line 1(b) the employer
identification number (EIN). If you don’t
have an EIN, enter your social security
number (SSN) or individual taxpayer
identification number (ITIN). If you’re the
sole owner of an LLC that isn’t treated as a
separate entity for federal income tax
purposes, enter the EIN given to the LLC.
If you don’t have an EIN, enter the owner's
name and tax identification number.
Enter on line 1(c) the net qualified
business income or (loss) for the trade,
business, or aggregation reported in the
corresponding row. Do not include here
any losses or deductions suspended from
use in calculating taxable income in the
current year or any portion of qualified
losses or deductions previously
suspended by other Code provisions that
are allowed in calculating taxable income
in the current year. See Line 3, later.

Line 2

If you have more than five trades or
businesses, attach a statement with the
name and taxpayer identification number
of the trade(s) or business(es) and include
the income and loss from those trade(s) or
business(es) in the total for line 2.

Line 4

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 PTP income. The loss will be
carried forward to next year. This
carryforward doesn’t affect the
deductibility of the loss for purposes of
any other provisions of the Code.

Line 6

Enter income as a positive number and
losses as a negative number.

Line 7

Include here the qualified portion of PTP
(loss) carryforward allowed in calculating
taxable income in the current year, even if
the loss was from a PTP that you no
longer hold an interest in or is no longer in
existence. Losses and deductions that
remain suspended by other Code
provisions are not qualified losses and
deductions and must be tracked
separately from any qualified trade or
business losses for use when
subsequently allowed in calculating
taxable income.

Line 8

Any negative amount will be carried
forward to the next year. This carryforward
doesn’t affect the deductibility of the loss
for purposes of any other provisions of the
Code.

Line 11

Enter your taxable income figured before
any QBI deduction, computed as follows.
• Form 1040, 1040-SR, or 1040-NR
filers: Form 1040, 1040-SR, or 1040-NR,
line 11, minus Form 1040, 1040-SR, or
1040-NR, line 12.
• Form 1041 filers: Form 1041, line 23,
plus Form 1041, line 20.
• Form 1041-N filers: Form 1041-N,
line 13, plus qualified income deduction
reported on Form 1041-N, line 9.
• Form 990-T filers: Form 990-T, Part I,
line 11, plus Form 990-T, Part I, line 9.
• S-corporation portion of ESBT filers:
ESBT Tax Worksheet, line 13, plus ESBT
Tax Worksheet, line 11.
-4-

Line 15

Enter this amount on your Form 1040 or
1040-SR, line 13; Form 1040-NR,
line 13a; Form 1041, line 20; Form
1041-N, line 9; Form 990-T, line 9; and
S-corporation portion of an ESBT, line 11.

Line 16

This is the amount to be carried forward to
the next year. 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. This
carryforward doesn’t affect the
deductibility of any loss for purposes of
any other provisions of the Code.

Line 17

If the amount is more than zero, the loss
must be carried forward to next year. This
amount will offset REIT dividends and PTP
income in later tax years regardless of
whether the qualified PTP(s) that
generated the loss is still in existence.
This carryforward doesn’t affect the
deductibility of any loss for purposes of
any other provisions of the Code.

Instructions for Form 8995 (2021)

QBI Flow Chart
Figure 1. Use this chart to determine if an item of income, gain, deduction, or loss is included in QBI.
No

1. Is the item effectively connected with the conduct of a trade
or business within the U.S.?
Yes

DRAFT AS OF
September 9, 2021
2. Is the item from a trade or business (this includes general
business income and deduction items as well as deductible tax on
self-employment income, self-employed health insurance,
contributions to qualified retirement plans, unreimbursed
partnership expenses, interest expenses for the purchase of the
partnership/S corporation interest/stock)?

No

Yes

3. If the item is from a pass-through entity (partnership, S
corporation, or trust) and the character of the item can’t be
determined at the entity level (section 1231 gains/losses, involuntary
conversions, interest from debt financed distributions, etc.), did you
determine the item to be ordinary (not capital or personal)? Note: If
the item isn’t from a pass-through entity and it doesn’t require a
determination at the investor level, skip this test.

No

Yes
4. Is the item included in figuring your taxable income? Items
disallowed or limited, including the basis, at-risk, passive loss, or
excess business loss rules, aren’t included in QBI until the year
included in taxable income.

No

Yes
5. Is the item treated as a capital gain (loss) or dividend/dividend
equivalent?

Yes

No
6. Is the item interest income other than interest income allocable to
a trade or business? Note: Interest income from an investment of
working capital, reserves, or similar accounts isn’t allocable to a
trade or business.

Yes

No
Yes

7. Is the item an annuity, other than an annuity received in
connection with the trade or business?
No
8. Is the item a commodities transaction, foreign currency gain (loss)
described in section 954(c)(1)(C) or (D), or from a notional principal
contract under section 954(c)(1)(F)?

Yes

No
9. Is the item income (loss) from a qualified PTP? If “Yes,” it’s not
QBI, but it’s included in the REIT/PTP component of the QBI
computation. Include this item as a qualified item of income, gain,
deduction, or loss from a PTP.

Yes

No
Yes

10. Is the item W-2 wage income (except “Statutory Employees”
where Form W-2, box 13, is checked)?
No

See Figure 2, QBI Flow
Chart (continued).

Instructions for Form 8995 (2021)

-5-

This item isn’t QBI.

QBI Flow Chart (continued)
Figure 2. Use this chart to determine if an item of income, gain, deduction, or loss is included in QBI.
11. Is the item an amount received for reasonable compensation
from an S corporation, an amount received as a guaranteed
payment, or a payment received for services other than in a capacity
as a partner under section 707(a)?

Yes

DRAFT AS OF
September 9, 2021
No

No

12. Is the item related to an SSTB?
Yes

Yes

13. Is your taxable income at or below the threshold?
No

14. Is your taxable income above the threshold and within the
phase-in range? If “Yes,” this item is partially includible in QBI. Use
Form 8995-A, instead, and complete Schedule A (Form 8995-A).

Yes

This item is QBI.

This item isn’t QBI.

No

-6-

Instructions for Form 8995 (2021)

Tracking Losses or
Deductions Suspended by
Other Provisions
A worksheet, QBI Loss Tracking
Worksheet, is provided below that
CAUTION can help you track your
suspended losses. Losses and
deductions that would be properly
includible in QBI, if such loss or deduction
wasn't suspended (excluded from taxable
income) by other provisions, must be
tracked separately for purposes of
determining the future amount includible
as negative QBI. Use as many copies of
the worksheet as necessary to separately
track your suspended loss(es) under each
suspending provision.

!

used. To apply this rule, prior year
suspended losses allowed must first be
allocated to any losses suspended from
pre-2018 years, 2017 and earlier, (row 1),
until the pre-2018 losses are exhausted.
All prior year suspended losses allowed
allocated to pre-2018 years are Non-QBI.
Once all pre-2018 losses have been used,
losses will be allocated based on the QBI
Fixed Percentage in column B for each
subsequent year in which losses were
suspended.

2. For the allocation to Non-QBI,
multiply the remaining losses (after Step
4), up to the sum of the remaining
suspended losses reported in column H,
row 2, and column L, row 2, by 100% less
the amount in column B, row 2, and add it
to any amount already included in column
F, row 3.
3. If any prior year suspended losses
allowed remain from column C, row 3,
after Steps 5(a) and (b), multiply the
remaining losses (after Steps 5(a) and
(b)), up to the sum of the remaining
suspended losses reported in column H,
row 3, and column L, row 3, by column B,
row 3, and add it to any amount already
included in column J, row 3.
4. Then, multiply the remaining losses
(after Steps 5(a) and (b)), up to the sum of
the remaining suspended losses reported
in column H, row 3, and column L, row 3,
by 100% less the amount in column B, row
3, and add it to any amount already
included in column F, row 3.

DRAFT AS OF
September 9, 2021

Specific Instructions

Note. All losses should be entered as a
negative number on the worksheet.
Column A. Total suspended losses in
year of disallowance. For rows 1
through 4, enter your suspended losses
by year starting with any pre-2018 losses.
Additional rows can be added as needed
in future years. Allocate these losses
between Non-QBI and QBI in columns E
and I. See below.
Note. All pre-2018 losses are allocable to
Non-QBI.
Column E. Non-QBI suspended losses.
For rows 1 through 4, enter suspended
losses allocable to Non-QBI into the
appropriate year row (for example, row 1,
pre-2018; row 2, 2018; row 3, 2019, etc.).
Column I. QBI suspended losses. For
rows 2 through 4, enter suspended losses
allocable to QBI into the appropriate year
row (for example, row 2, 2018; row 3,
2019, etc.).
Column B. QBI fixed percentage.
Divide column I by column A for each year
and enter the percentage in the
corresponding year row.
Column C. Prior year suspended losses allowed. For rows 2 through 4, enter
any prior year suspended losses allowed
in the corresponding row for the year
allowed.
Note. The total prior year suspended
losses allowed entered in column C, row
5, can't exceed the total amount entered in
column A, row 5.
Column F. Non-QBI allocated prior
year suspended losses allowed and
Column J, QBI allocated prior year
suspended loses allowed. When
allocating prior year suspended losses
allowed (column C) between Non-QBI
(column F) and QBI (column J), the
First-In-First-Out (FIFO) method must be
Instructions for Form 8995 (2021)

Prior Year Suspended Losses
Allowed in 2018

Note. If column C, row 2, is zero, skip
Step 1 through Step 3.

Step 1. Allocate prior year suspended
losses allowed from column C, row 2, up
to the total suspended losses reported in
column A, row 1, to column F, row 2.

Step 2. If there are any prior year
suspended losses allowed remaining from
column C, row 2, after Step 1, allocate the
remaining prior year suspended losses
allowed between QBI and Non-QBI.
1. For the allocation to QBI, multiply
the remaining losses (after Step 1), up to
the total suspended losses reported in
column A, row 2, by column B, row 2, and
enter this amount in column J, row 2.
2. For the allocation to Non-QBI,
multiply the remaining losses (after Step
1), up to the total suspended losses
reported in column A, row 2, by 100% less
the amount in column B, row 2, and add it
to any amount already included in column
F, row 2.
Step 3. Complete the instructions for
columns G, K, H, and L for rows 1 and 2.

Prior Year Suspended Losses
Allowed in 2019
Note. If column C, row 3, is zero, skip
Step 4 through Step 6.
Step 4. Allocate prior year suspended
losses allowed from column C, row 3, up
to the remaining suspended losses
reported in column H, row 1, to column F,
row 3.
Step 5. If there are any prior year
suspended losses allowed remaining from
column C, row 3, after Step 4, allocate the
remaining prior year suspended losses
allowed between QBI and Non-QBI using
the FIFO method until each year's loss has
been reduced to zero.
1. For the allocation to QBI, multiply
the remaining losses (after Step 4), up to
the sum of the remaining suspended
losses reported in column H, row 2, and
column L, row 2, by column B, row 2, and
enter this amount in column J, row 3.
-7-

Step 6. Complete the instructions for
columns G, K, H, and L for rows 1 through
3.

Prior Year Suspended Losses
Allowed in 2021 and Beyond
Repeat Step 4 through Step 6 and adjust
as necessary for any prior year suspended
losses allowed in column C, row 4, and
each row thereafter as applicable.
Additional year rows and columns may
be added as needed in future years.
Columns G and K. Utilized “20XX.”
Use these columns to show how the
allocated prior year suspended losses
allowed in columns F and J are utilized
each year. For example, the loss reported
in column F for row 2 must tie the amount
reported column G(i), row 5, and the loss
reported in column F for row 3 must tie to
the amount reported in column G(ii), row
5, etc.
Column H. Remaining suspended losses. For each row, take the amount in
column E less the amounts utilized in all
columns G(i), G(ii), and G(iii). This amount
can't be more than zero.
Column L. Remaining suspended losses. For each row, take the amount in
column I less the amounts utilized in all
columns K(i), K(ii), and K(iii). This amount
can't be more than zero.
Column D. Allowed losses limited by
other Code sections. When a prior year
suspended loss allowed under one Code
section is subsequently limited by another
Code section, this loss shouldn't be
included in the QBI calculation until the
loss is allowed in the computation of
taxable income. Instead, that loss is

added to the total suspended losses in the
year of disallowance under the new
limiting Code section for continuation of its
suspension. This column along with row 6
addresses how to account for such losses.
In column D enter the amount of any
prior year suspended losses allowed
under this Code section, but subsequently
disallowed under another Code section on
the row for the year the loss was allowed
under this Code section. These amounts
will be allocated between Non-QBI and
QBI in columns G and K for the
corresponding year. See row 6 below.

other Code sections between QBI and
Non-QBI, start with QBI for the 2018 row.
Take column K(i), row 5, divided by the
sum of column K(i), row 5, plus column
G(i), row 5, multiplied by column D, row 2,
and enter this amount in column K(i), row
6. Written as a formula: column K(i), row 6
= column D, row 2 x (column K(i), row 5 ÷
(column K(i), row 5 + column G(i), row 5)).
Next, compute the amount for Non-QBI
for the 2018 row. Take column G(i), row 5,
divided by the sum of column G(i), row 5 +
column K(i), row 5, multiplied by column
D, row 2, and enter this amount in column
G(i), row 6. Written as a formula: column
K(i), row 6 = column D, row 2 x (column

K(i), row 5 ÷ (column G(i), row 5 + column
K(i), row 5)).
Continue the computation for columns
K(ii) and G(ii) and then for columns K(iii)
and G(iii), except multiply the percentage
times the amount in column D, row 3, for
2019 and column D, row 4, for 2020,
respectively.

DRAFT AS OF
September 9, 2021

Row 6. Allocation of allowed losses
limited by other Code sections. To
allocate the allowed losses limited by

-8-

Row 7. Total prior year suspended losses allowed that must be included in
QBI. The amounts reported in columns
K(i), K(ii), and/or K(iii) for row 7 equals the
loss amount that must be included in your
current year QBI, respectively for each
year, as a loss from a separate trade or
business.

Instructions for Form 8995 (2021)

Keep for Your Records
QBI Loss Tracking Worksheet
Use this worksheet to track losses or deductions suspended by other provisions and attributable to QBI using the FIFO method.
[Enter the Code section limiting your loss]

DRAFT AS OF
September 9, 2021
Code

Part I

Suspended & Allowed Losses
A. Total suspended
losses in year
of disallowance

1.
2.
3.
4.
5.
6.

B. QBI fixed percentage

D. Allowed losses
limited by other
Code sections

0.00 %

Pre-2018
2018
2019
2020
2021
Total

Part II

C. Prior year
suspended
losses allowed

%
%
%
%

Non-QBI Suspended and Allowed Losses

Allocable to Non-QBI
E. Suspended
losses

F. Allocated prior
year suspended
losses allowed

G(i). Utilized
2018

G(ii). Utilized
2019

G(iii). Utilized
2020

G(iv). Utilized
2021

H. Remaining
suspended
losses

K(ii). Utilized
2019

K(iii). Utilized
2020

K(iv). Utilized
2021

L. Remaining
suspended
losses

1.
Pre-2018
2.
2018
3.
2019
4.
2020
5.
2021
6.
Total
7. Allocation of allowed losses limited by other
Code sections . . . . . . . . . .

Part III

QBI Suspended and Allowed Losses

Allocable to QBI
I. Suspended
losses

J. Allocated prior
year suspended
losses allowed

K(i). Utilized
2018

1.
Pre-2018
2.
2018
3.
2019
4.
2020
5.
2021
6.
Total
7. Allocation of allowed losses limited by other
Code sections . . . . . . . . . .
8. Total prior year suspended losses allowed that
must be included in QBI

.

.

Instructions for Form 8995 (2021)

.

.

.

.

.

-9-

Paperwork Reduction Act Notice We ask for the information on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.

DRAFT AS OF
September 9, 2021

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for
individual and business taxpayers filing this form is approved under OMB control number 545-0123 and is included in the estimates
shown in the instructions for their business income tax returns. The estimated burden for all other taxpayers who file this form is shown
below:
Form
8895
8895-A
Schedule A (8895-A)
Schedule B (8895-A)
Schedule C (8895-A)
Schedule D (8895-A)

Recordkeeping
4 hrs., 43 min.
7 hrs., 52 min.
3 hrs., 16 min.
1 hr., 34 min.
1 hr., 19 min.
1 hr., 5 min.

Learning
51 min.
1 hr., 53 min.
7 min.
—
7 min.
16 min.

-10-

Preparing, copying, assembling and sending
2 hrs., 6 min.
6 hrs., 6 min.
1 hr., 15 min.
20 min.
50 min.
47 min.

Instructions for Form 8995 (2021)