What share of the Qualified Tips Deduction belongs to each business?

If you only had one business and no other qualified tips included in your Qualified Tips Deduction, then make sure the qualified business income (QBI) or W-2 wages paid entered on the QBI deduction screens doesn't include any of your Qualified Tips Deduction.

If you have multiple sources of tips, you'll need to allocate how much of your total Qualified Tips Deduction came from this particular business.

Example: You earned the following tips from your W-2 job and your businesses:

• W-2 Job - $5,000
• Business 1 - $15,000
• Business 2 - $10,000

Let's assume you need to figure out Business 1's share of the tips deduction. Here's how you'd calculate it:

1. Add up your total tips, which in this case is $30,000 ($5,000 + $15,000 + $10,000).
2. Check how much of your total tips from Step 1 is actually deducted on your return. If needed, you can find this later on in the software on the summary screens, and you can always come back here to make adjustments once you know this amount. In this example, since the total tips you received is more than the max tips deduction allowable of $25,000, your total tips deduction is $25,000.
3. Next, determine what percent of the total tips came from Business 1. In this example, 50% ($15,000 / $30,000) of your total tips came from Business 1.
4. Now multiply the percent in Step 3 by your total tips deduction from Step 2. In the example, for Business 1, it'd be 50% * $25,000, which equals $12,500. This is the share of the tips deduction for Business 1.

See the instructions for Form 8995-A  or Form 8995  for more information.