Which QBID Form to Use: A Look at Form 8995 vs. 8995-A

The Qualified Business Income Deduction (QBID), also known as Section 199A, is a tax benefit for owners of pass-through businesses. Enacted as part of the Tax Cuts and Jobs Act of 2017, it allows eligible self-employed individuals and owners of partnerships, S corporations, trusts, and estates to deduct up to 20 percent of their qualified business income. This provision was designed to provide a tax reduction for businesses that are not structured as C corporations, and it is available whether you itemize or take the standard deduction.

Determining the Correct QBID Form

The IRS provides two forms to calculate the QBID: Form 8995, Qualified Business Income Deduction Simplified Computation, and Form 8995-A, Qualified Business Income Deduction. The primary factors that determine which form to use are your taxable income and the nature of your business. For the 2025 tax year, if your taxable income before the QBID is at or below $197,300 for single filers or $394,600 for those married filing jointly, you can use the simpler Form 8995.

You must use the more detailed Form 8995-A if you meet certain conditions. These include having taxable income above the thresholds, being a patron of an agricultural or horticultural cooperative, or having qualified Real Estate Investment Trust (REIT) dividends or Publicly Traded Partnership (PTP) income. You must also use Form 8995-A if your business is a Specified Service Trade or Business (SSTB) and your income is above the thresholds.

An SSTB is a business involving services in specific fields. These include:

• Health, law, and accounting
• Actuarial science and consulting
• Performing arts and athletics
• Financial services
• Any trade where the principal asset is the reputation or skill of its employees

For an SSTB, the deduction begins to phase out for the 2025 tax year once taxable income exceeds the thresholds. The deduction is eliminated once income reaches $247,300 for most filers or $494,600 for joint filers.

Information Required for QBID Calculation

Before completing either form, you must gather specific financial figures. The core components needed for the calculation include:

• Qualified Business Income (QBI): This is the net profit from your qualified trade or business, defined as the net amount of qualified items of income, gain, deduction, and loss from your business operations. You must calculate this figure for each separate business you own. Certain items are specifically excluded from QBI, such as W-2 wages you receive as an employee, capital gains or losses, and certain interest or dividend income.
• Taxable income before the QBID: This figure is calculated on your Form 1040 and represents your total income after adjustments and deductions, but before the QBID itself is taken.
• W-2 wages: For those with income above the thresholds, this is the total wages subject to income tax withholding paid by your business to its employees that are properly allocable to your QBI.
• Unadjusted Basis Immediately after Acquisition (UBIA) of qualified property: This is the original cost of tangible, depreciable property your business holds at the end of the year and uses to generate QBI. Qualified property includes items like vehicles, machinery, and buildings, but not land, and the basis is calculated using the cost of the asset before any depreciation deductions have been taken.

Completing Form 8995

If your taxable income is below the statutory thresholds, you will use Form 8995. On the form, you will list each of your qualified trades or businesses and the corresponding QBI for each one to arrive at your aggregate QBI. You will then multiply your total QBI by 20% (0.20).

A separate calculation requires you to find 20% of your taxable income, after subtracting any net capital gains. Your allowable Qualified Business Income Deduction is the smaller of these two figures. This final number is the amount you will carry over to your Form 1040.

Completing Form 8995-A

Taxpayers with income above the thresholds, who own an SSTB, or have REIT dividends or PTP income must use Form 8995-A. This form requires QBI, W-2 wages, and the UBIA of qualified property to calculate potential limitations on the deduction.

Aggregating Businesses

The form includes Schedule A, which is used if you choose to aggregate multiple businesses. To aggregate, the businesses must meet specific tests, such as being part of the same general type of trade or business and having common ownership. Aggregation can be advantageous as it allows you to combine the QBI, W-2 wages, and UBIA of the grouped businesses, which may result in a larger overall deduction.

Calculating the Limitation

For business owners with income above the thresholds, the deduction for each business is subject to a limit based on wages and property. This limit is the greater of two amounts: 50% of the W-2 wages paid by the business, or the sum of 25% of the W-2 wages plus 2.5% of the UBIA of qualified property. Your deduction for that business is the lesser of 20% of its QBI or this calculated limit.

If you operate an SSTB and your income falls within the phase-out range, Form 8995-A contains specific lines to calculate the applicable percentage of your QBI, wages, and UBIA that you can use. The form also has a dedicated section to account for qualified REIT dividends and PTP income, which are added to your business QBI component to arrive at your total deduction.

Reporting the Deduction on Your Tax Return

After completing either Form 8995 or Form 8995-A, the resulting deduction is reported on your individual income tax return, Form 1040. You will transfer the final deduction amount from your QBID form to the designated line on Form 1040; you should verify the correct line number for the specific tax year you are filing.

When you file your tax return, you must include the completed Form 8995 or Form 8995-A as supporting documentation. The deduction works by reducing your adjusted gross income (AGI) to arrive at your final taxable income, which lowers your total tax liability.