Qualified business loss carryover did not reduce my rental property profit on 1040

Forum|Forum|1 year ago
February 4, 2025
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I had a qualified business loss carryover of $11,999 in 2020 on rental property. In 2021, I made a profit of $4609 on rental property. My 2021 tax return shows Form 8995 with the $4609 subtracted from the $11,999 carryover, leaving a net carryover of $7390. But still, on Form 1040, the $4609 was added to my income. Similarly in 2022, the profit I made from my rental property ($5089) was subtracted again, leaving a QBI loss carryover of $2301. Again the $5089 was added to my income on Form 1040, line 8.

I would have thought that using the QBI loss carryover would have erased my profit for those years. Am I missing something?

MAK70

The qualified business income deduction (QBID) is a deduction based on a percentage of profits from business income. If you have a loss, you cannot claim the QBID for that year, and the loss is treated separately for the income. If you have a QBID loss, you have to carry it forward and you do not get the deduction on any future income until the loss is absorbed. Your rental loss would have been used to reduce your income in the year if you qualified for the special allowance; otherwise it is carried forward as a passive loss until you dispose of your interest in the rental activity.

Essentially, you can think of the QBID as separate from the business income.