What QBI is
The qualified business income deduction lets eligible owners of pass-through businesses (sole proprietors, partners, S-corp shareholders, some trusts) deduct up to 20% of qualified business income on their personal return. The deduction was created by the Tax Cuts and Jobs Act and is taken below the line — it reduces taxable income but does not reduce self-employment tax or adjusted gross income.
Who uses Form 8995
Use the simplified Form 8995 when your taxable income before the QBI deduction is at or below the annual threshold (indexed yearly; roughly $191,950 single / $383,900 joint for 2024). Above the threshold, use Form 8995-A, which adds W-2 wage and unadjusted-basis-immediately-after-acquisition (UBIA) limitations and a separate computation for "specified service trade or business" (SSTB) activities.
What counts as QBI
QBI is the net amount of qualified items of income, gain, deduction, and loss from each qualified trade or business. It excludes capital gains and losses, dividends, interest income not allocable to a trade or business, reasonable compensation paid by an S-corp to a shareholder, and guaranteed payments by a partnership. Many one-person consulting businesses generate nearly all of their net income as QBI.
SSTB rules
A specified service trade or business — health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, and investment management — phases out the QBI deduction completely once taxable income exceeds the upper threshold. Engineers and architects are explicitly excluded from the SSTB list.
Combining multiple businesses
If you operate more than one qualified trade or business, QBI is computed separately for each and then combined. A loss in one business reduces QBI from another. The 20% of taxable-income-minus-net-capital-gain limitation is applied last and can reduce the overall deduction in years with significant capital gains.
What it does not cover
Form 8995, Qualified Business Income Deduction Simplified Computation does not stand alone — it lives inside a small ecosystem of supporting forms, schedules, and elections that together carry the full weight of a small-business return. Knowing what Form 8995, Qualified Business Income Deduction Simplified Computation does not handle is just as important as knowing what it does. The instructions list the cross-references explicitly: items computed elsewhere (Schedule C net profit, Schedule SE self-employment tax, Form 4562 depreciation), items reported on a separate form (Form 8829 home office, Form 1099-NEC information returns), and items handled by an entirely different return entirely (Form 1120-S for S-corps, Form 1065 for partnerships). Drawing the boundary cleanly avoids double-counting and avoids leaving deductions on the table.