Form 8995 is the simplified IRS form for the qualified business income (QBI) deduction, which lets many sole proprietors, partners and S corporation owners deduct up to 20% of their qualified business income. You can use it for 2025 if your taxable income before the deduction is $197,300 or less, or $394,600 or less if married filing jointly; above that, you use Form 8995-A.
The QBI deduction, also called the section 199A deduction, is one of the most valuable breaks for small business owners in the US, and it's easy to miss if you file your own return. You don't have to itemize to claim it. This page is about the form itself; my QBI deduction guide covers the break in broader terms. Here's how the IRS explains who qualifies and how the simple form works.
Who can use Form 8995
As of October 2026, the current IRS instructions, which cover 2025, say individuals and eligible estates and trusts use Form 8995 if all of these apply:
- You have QBI, qualified REIT dividends, or qualified publicly traded partnership (PTP) income or loss
- Your 2025 taxable income before the QBI deduction is $394,600 or less if married filing jointly, or $197,300 or less for all other returns
- You aren't a patron in a specified agricultural or horticultural cooperative
Otherwise you use Form 8995-A. The deduction is available whether you itemize or take the standard deduction, which surprises a lot of people.
How the deduction is worked out
| Component | What it covers |
|---|---|
| QBI component | Up to 20% of qualified business income from a sole proprietorship, partnership, S corporation, trust or estate |
| REIT/PTP component | 20% of qualified REIT dividends and qualified PTP income |
| Overall cap | The total can't exceed 20% of taxable income before the deduction, minus net capital gain |
Income from a C corporation never counts. If your business is still an LLC or sole proprietorship, my guide to S corp vs LLC explains how the choice affects what flows through to you.
What counts as qualified business income
QBI is the net amount of qualified income, gain, deduction and loss from your US trades or businesses. The IRS lists several things that aren't QBI, and the first two matter most for owners:
- Reasonable compensation you receive from your own S corporation
- Guaranteed payments from a partnership
- Capital gains or losses, and interest not allocable to the business
- Certain dividends, and annuities not received in connection with the business
- Tip income excluded from net profit under the new rules for 2025 through 2028
So an S corporation owner's salary isn't QBI, but the profit left after that salary can be. Being an employee doesn't count as a qualified business at all. And the business has to be a real trade or business: if you're unsure where a side activity sits, read my guide to hobby vs business rules.
The SSTB rule, and why creators should check it
Specified service trades or businesses (SSTBs) are generally excluded from the deduction above the income thresholds. The list covers health, law, accounting, actuarial science, performing arts, consulting, athletics, financial and brokerage services, and investing. It also includes any business whose main asset is the reputation or skill of its owners or employees, shown by income from endorsing products or services, licensing your name, image or likeness, or appearing at events or on media.
Here's the insight most people miss: that last category describes a lot of influencers, speakers and consultants. Below the thresholds it doesn't matter, because your SSTB is treated as a qualified business. Between $197,300 and $247,300 (or $394,600 and $494,600 joint) only part of it qualifies, and that's Form 8995-A territory.
If your business made a loss
If you have a qualified business net loss for the year, you don't get the QBI deduction unless you have qualified REIT dividends or PTP income. The loss is carried forward to next year. The IRS adds that this carryforward doesn't affect whether the loss is deductible for other purposes.
Rental property and the safe harbor
Landlords often assume rental income can't count. The IRS offers a safe harbor under which a rental real estate enterprise is treated as a trade or business for the QBI deduction if it meets certain criteria, set out in Revenue Procedure 2019-38. A rental that doesn't meet the safe harbor can still qualify if it's a section 162 trade or business on its own facts. Renting property to a business you commonly control is also treated as a qualified trade or business. If you own a rental alongside your main business, it's worth checking both.
Want AI doing the heavy lifting in your marketing?
I build the systems that handle the boring 80 percent, so you get your week back. Done properly, with the human kept in.
What changes from 2026
The IRS notes that for tax years beginning after 2025, the deduction becomes the greater of the usual calculation or a new minimum deduction for active qualified business income. An active business is one in which you materially participate. Watch the 2026 form instructions for how it's claimed.
How to complete Form 8995
- List each trade or business with its net QBI or loss, from Schedule C, Schedule E or your K-1s.
- Add any qualified business loss carried forward from last year.
- Multiply total QBI by 20% to get the QBI component.
- Add 20% of qualified REIT dividends and PTP income.
- Work out 20% of taxable income before the deduction, minus net capital gain.
- Claim the smaller of the two amounts on your Form 1040.
My verdict
If you're a freelancer or small business owner under the income limits, Form 8995 is a short form that can deduct up to a fifth of your qualified business profit. Check it's on your return every year. Consultants and creators earning near the thresholds should take advice, because the SSTB rules start to bite exactly where incomes are growing.
Frequently asked questions
What is Form 8995?
The simplified IRS form to figure the qualified business income (section 199A) deduction.
Who can use Form 8995 for 2025?
People with QBI whose taxable income before the deduction is $197,300 or less, or $394,600 or less if married filing jointly, and who aren't patrons of certain cooperatives.
How much is the QBI deduction?
Up to 20% of qualified business income plus 20% of qualified REIT dividends and PTP income, capped at 20% of taxable income minus net capital gain.
Is my S corporation salary QBI?
No. Reasonable compensation from an S corporation isn't QBI, though the remaining profit can be.
What is an SSTB?
A specified service trade or business, such as health, law, accounting, consulting or a business built on the owner's reputation or skill.
Do I need to itemize to claim the QBI deduction?
No. It's available whether you itemize or take the standard deduction.
