What types of income does qualified business income (QBI) include?
Your QBI includes items of income, gain, deduction, and loss from your trades or businesses that are effectively connected with the conduct of a trade or business within the United States. This includes income from partnerships, S corporations, sole proprietorships, and certain trusts that are included or allowed in determining your taxable income for the year. It also includes other deductions attributable to the trade or business including, but not limited to, unreimbursed partnership expenses, business interest expense, deductible tax on self-employment income, self-employed health insurance, and contributions to qualified retirement plans.
Your QBI doesn't include any losses or deductions disallowed under the basis, at-risk, passive loss, or section 461(l) limitations, as they aren't included or allowed in determining your taxable income for the year. Instead, these losses and deductions are taken into account in the tax year they are included in determining your taxable income.
QBI doesn't include any of the following:
Your QBI doesn't include any losses or deductions disallowed under the basis, at-risk, passive loss, or section 461(l) limitations, as they aren't included or allowed in determining your taxable income for the year. Instead, these losses and deductions are taken into account in the tax year they are included in determining your taxable income.
QBI doesn't include any of the following:
- Items that aren't properly includible in income
- Investment items such as capital gains or losses, dividends, or interest income
- Interest income, other than interest income properly allocable to a trade or business (interest income attributable to an investment of working capital, reserves, or similar accounts is not properly allocable to a trade or business)
- W-2 income (except "Statutory Employees" where Box 13 of Form W-2 is checked)
- Income that isn't effectively connected with the conduct of business within the United States
- Commodities transaction or foreign currency gains or losses described in section 954(c)(1)(C) or (D)
- Income, loss, or deductions from notional principal contracts under section 954(c)(1)(F)
- Annuities (unless received in connection with the trade or business)
- Reasonable compensation from an S corporation
- Guaranteed payments
- Payments received by a partner for services other than in a capacity as a partner
- Qualified REIT dividends
- Qualified PTP income
- Qualified tip income that is excluded from net profit of the trade or business
