When calculating the Qualified Business Income Deduction (QBID), Qualified Business Income (QBI) is calculated by reducing the net profit or loss from all qualified businesses by these three adjustments:
- The deductible part of self-employment tax (Schedule 1 line 15)
- Contributions to qualified retirement plans (Schedule 1 line 16).
- The deduction for any self-employed health insurance (Schedule 1 line 17).
Thus, while the net profit from all qualifying business might be greater than $0, QBI (before any loss carryforward from the prior year) may calculate to $0 or a loss.
Note that the qualified business income or loss on Form 8995 line 1 for a business will be reduced by the above adjustments, and if there is more than one business the three deductions will be allocated to each business's QBI according to the following rules:
- The deductible part of SE tax and retirement plan contributions are allocated proportionately to each business according to each business's share of the total QBI.
- The deduction for self-employed health insurance is allocated to the business that paid the insurance.
Additional Information:
Qualified Business Income Overview
IRS: Instructions for Form 8995, Qualified Business Income Deduction Simplified Computation
IRS: Instructions for Form 8995-A, Qualified Business Income Deduction