K-1 box 20 code Z: section 199A information for the QBI deduction
K-1 box 20 code Z is the Schedule K-1 (Form 1065) code a partnership uses to report each partner's section 199A information: QBI, W-2 wages, UBIA of qualified property, section 199A dividends and PTP items. The partner uses it to figure the QBI deduction on Form 8995 or Form 8995-A.
“Generally, you may be allowed a deduction of up to 20% of your net qualified business income (QBI) plus 20% of your qualified REIT dividends, also known as section 199A dividends, and qualified PTP income from your partnership.” IRS, Partner’s Instructions for Schedule K-1 (Form 1065) (2025)
What does K-1 box 20 code Z report?
K-1 box 20 code Z reports the information a partner needs to figure the section 199A qualified business income (QBI) deduction from that partnership. According to the Partner's Instructions for Schedule K-1 (Form 1065) (2025), the deduction can be up to 20% of net QBI plus 20% of qualified REIT dividends and qualified PTP income, with the amounts on an attached statement.
The Instructions for Form 1065 (2025) tell partnerships to use Statement A, QBI Pass-Through Entity Reporting, or a substantially similar statement. For each trade, business or aggregation it shows the partner's share of qualified items of income, gain, deduction and loss, W-2 wages, UBIA of qualified property, qualified PTP items and section 199A dividends. The partnership must also say whether each business is a specified service trade or business (SSTB) and which businesses are aggregated. PTP W-2 wages and UBIA aren't reported. The amounts are a starting point: the partner instructions say the statement may include items that aren't includible, and the partner decides what is.
Where does each code Z item go on Form 8995 or 8995-A?
Each item on the box 20 code Z statement has a set line on the 2025 Form 8995 or Form 8995-A. Form 8995 uses only QBI and the REIT and PTP amounts, because below the taxable income threshold the W-2 wage and UBIA limit doesn't apply. Form 8995-A uses every item.
| Code Z statement item | Form 8995 (2025) | Form 8995-A (2025) |
|---|---|---|
| QBI (qualified items of income, gain, deduction and loss), by trade or business | Line 1, column (c) | Line 2, one column per business |
| W-2 wages | Not used | Line 4 |
| UBIA of qualified property | Not used | Line 7 |
| SSTB status | Not used | Line 1, column (b), and Schedule A (Form 8995-A) |
| Aggregation | Not used | Line 1, column (c), and Schedule B (Form 8995-A) |
| Section 199A dividends (qualified REIT dividends) | Line 6 | Line 28 |
| Qualified PTP items | Line 6 | Line 28 |
| QBI and W-2 wages allocable to qualified payments from a specified cooperative | Not allowed; use Form 8995-A | Schedule D (Form 8995-A), then line 14 |
| Section 199A(g) deduction from a specified cooperative | Not allowed; use Form 8995-A | Line 38 |
The Instructions for Form 8995-A (2025) add two rules for lines 4 and 7: if QBI on line 2 for a business is zero, the W-2 wages and UBIA for that business must also be zero. A business with a qualified business loss goes through Schedule C (Form 8995-A) for loss netting before Part I. A partner who is a patron of a specified agricultural or horticultural cooperative must use Form 8995-A and complete Schedule D (Form 8995-A), according to the partner's instructions for code Z, whatever their taxable income. Form 8995-A covers the full form.
Which form does a partner use for the 2025 QBI deduction?
A partner uses Form 8995 for 2025 if they have QBI, section 199A dividends or PTP income, their 2025 taxable income before the QBI deduction is $197,300 or less ($394,600 if married filing jointly), and they aren't a patron in a specified agricultural or horticultural cooperative. Everyone else uses Form 8995-A, according to the 2025 partner's instructions. On Form 8995-A, Part III phases in the wage and UBIA limit for taxable income above $197,300 but not more than $247,300 ($394,600 and $494,600 if married filing jointly).
QBI on the return isn't always the code Z amount. The Instructions for Form 8995 (2025) exclude guaranteed payments and capital gains from QBI, and require the partner to take into account deductions attributable to the business, such as the deductible part of self-employment tax, the self-employed health insurance deduction, retirement plan contributions and unreimbursed partnership expenses. Losses suspended under sections 704(d), 465 or 469 stay out of QBI until they're allowed. The QBI deduction page covers these adjustments.
What does a box 20 code Z calculation look like?
For example, Lee is a limited partner filing jointly with 2025 taxable income of $560,000 before the QBI deduction and no net capital gain or qualified dividends. Lee has no guaranteed payments and no box 14 amount, so there are no self-employment adjustments. The code Z statement shows one non-SSTB business with $150,000 of QBI, $40,000 of W-2 wages and $300,000 of UBIA. Lee's taxable income is above $494,600, so Form 8995-A applies the full wage and UBIA limit and Part III isn't used.
| Step | Form 8995-A line | Amount |
|---|---|---|
| QBI from the code Z statement | 2 | $150,000 |
| 20% of QBI | 3 | $30,000 |
| W-2 wages | 4 | $40,000 |
| 50% of W-2 wages | 5 | $20,000 |
| 25% of W-2 wages | 6 | $10,000 |
| UBIA of qualified property | 7 | $300,000 |
| 2.5% of UBIA | 8 | $7,500 |
| Add lines 6 and 8 | 9 | $17,500 |
| Greater of line 5 or line 9 | 10 | $20,000 |
| Wage and UBIA limitation (smaller of line 3 or 10) | 11 | $20,000 |
| Income limitation (20% of $560,000, no net capital gain) | 36 | $112,000 |
| QBI deduction, to Form 1040 line 13a | 39 | $20,000 |
The wage and UBIA limit cuts Lee's deduction from $30,000 to $20,000. At taxable income of $394,600 or less, Form 8995-A tells the partner to skip lines 4 through 12, and the full $30,000 would carry through to line 13.
What do reviewers check on box 20 code Z?
A reviewer checking how box 20 code Z reached Form 8995 or Form 8995-A confirms six items, each tied to the 2025 IRS instructions. The code Z statement and the K-1 face come first, because guaranteed payments, box 14 and suspended losses all change QBI. The prior-year Form 8995 or Form 8995-A comes second, because a qualified business loss carryforward reduces this year's QBI. Where the partner has more than one K-1, each business gets its own row or column, and the reviewer ties each one back to the right statement. The Schedule K-1 (Form 1065) page shows where the rest of the K-1 lands, which matters here because box 1, box 4 and box 14 decide what QBI adjustments are needed.
Every line checked against the documents the client sent
Filed reads the partner's K-1, the box 20 code Z statement and the prior-year Form 8995 or 8995-A, then checks every line of the QBI deduction against them. Anything that doesn't tie comes back as a review item with a citation to the source.
Book a demoForm 8995-A line 2 shows $182,000 for this partnership, but the code Z statement reports QBI of $150,000 and box 4a shows $32,000 of guaranteed payments. Confirm whether line 2 should start from $150,000.
Common questions
Does box 20 code Z include guaranteed payments?
Box 20 code Z QBI shouldn't include guaranteed payments, and the partner keeps them out either way. The Instructions for Form 8995 (2025) list amounts received as guaranteed payments among the items QBI doesn't include, so box 4a and 4b amounts are reported on Schedule E but never on Form 8995 line 1 or Form 8995-A line 2.
What does STMT next to box 20 code Z mean?
STMT next to box 20 code Z means the section 199A information is on an attached statement instead of in the box. The partner instructions say the partnership enters an asterisk and STMT for items that can't be shown as one dollar amount. If the statement is missing, the partner should request it from the partnership before preparing the deduction.
Is a suspended partnership loss included in QBI?
A partnership loss suspended under the basis, at-risk or passive activity rules isn't included in QBI in the year it's suspended. The Instructions for Form 8995 (2025) say qualified losses enter QBI in the year they're allowed in taxable income, and losses from before 2018 generally aren't qualified losses at all.