Schedule K-1 Box 17 Code V STMT and the QBI Deduction

Box 17, Code V on your S-corporation Schedule K-1 is where the corporation reports the Section 199A information you need to calculate your qualified business income (QBI) deduction on your personal return. The dollar amount printed next to Code V is not your deduction. It is one input among several, and the rest live on a supplemental statement attached to the K-1. You run the calculation yourself on Form 8995 or Form 8995-A.

If your K-1 came from a partnership rather than an S-corporation, the same information appears in Box 20, Code Z of Form 1065’s K-1. Everything below applies to that reporting as well.¹

What the Code V Statement Actually Gives You

Box 17 itself is labeled “Other information,” and Code V flags the Section 199A data. The corporation can’t calculate your deduction because the final number depends on your total taxable income, filing status, and any QBI you have from other sources. So it gives you the entity-level pieces on an attached statement.²

Expect to see the following line items:

Qualified Business Income

The entity’s net QBI: income, gains, deductions, and losses from the trade or business combined into a single number. Investment items like capital gains, dividends, and interest that aren’t tied to the business are stripped out. For S-corporation shareholders, reasonable compensation the corporation paid you is also excluded.³

W-2 Wages

The entity’s share of W-2 wages allocable to the qualified trade or business. This figure feeds one of the two limitation formulas that cap the deduction for higher-income taxpayers. It includes total wages subject to income tax withholding, elective deferrals, and deferred compensation paid by the business.

UBIA of Qualified Property

The unadjusted basis immediately after acquisition of tangible, depreciable property the business uses to produce QBI and still holds at year-end. This is the second variable in the wage-and-property limitation and exists so capital-intensive businesses with few employees still have a path to the deduction.

SSTB Status

The statement discloses whether the entity operates a specified service trade or business. SSTBs are businesses whose value comes primarily from the personal skills or reputation of their owners or employees: health, law, accounting, actuarial science, financial services, consulting, athletics, performing arts, brokerage, and investment management. Above certain income levels, SSTB income loses the deduction entirely.

REIT Dividends and PTP Income

Code V can also carry your share of qualified REIT dividends and qualified publicly traded partnership income flowing through the entity. These amounts qualify for the same deduction rate but skip the W-2/UBIA limits, and the statement should break them out separately.²

How the QBI Deduction Works in 2026

The One Big Beautiful Bill Act made the QBI deduction permanent and increased the rate from 20% to 23% beginning in 2026. You multiply your net QBI by 23%, then test the result against two ceilings.

The Taxable Income Cap

The deduction cannot exceed 23% of your taxable income (figured before the QBI deduction) minus any net capital gains, including qualified dividends. If your QBI math produces $30,000 but 23% of your taxable income minus net capital gains is only $20,000, the deduction stops at $20,000.⁴

The W-2 Wage and UBIA Limitation

For taxpayers above the income thresholds below, the deduction for each business is further limited to the greater of:

50% of the business’s W-2 wages, or
25% of W-2 wages plus 2.5% of the UBIA of qualified property

If 23% of QBI exceeds whichever of those two amounts is larger, the deduction gets cut down to that larger amount. This is why the W-2 wage and UBIA numbers on your Code V statement matter. A business with no employees and no depreciable property produces zero under both formulas, and above the threshold that means zero deduction.⁵

2026 Income Thresholds

Below a certain taxable income level, you take the full 23% with no W-2/UBIA test and no SSTB restriction. For 2026, the approximate thresholds are $203,000 single and $406,000 joint. Under those numbers, ignore the wage and property figures on your statement and go straight to Form 8995.

The Act also widened the phase-in range starting in 2026. It now runs $75,000 for single filers and $150,000 for joint filers, meaning the partial-deduction band stretches from roughly $203,000 to $278,000 single, and from roughly $406,000 to $556,000 joint. Inside that band the W-2/UBIA limitation blends in gradually. Check the 2026 Form 8995-A instructions when released for the final inflation-adjusted figures.

What the SSTB Label Does at Each Level

Below the lower threshold, the SSTB flag on your statement is irrelevant and you get the full deduction. Inside the phase-in range, only a shrinking fraction of the SSTB’s QBI, W-2 wages, and UBIA counts. If you’re 60% of the way through the range, only 40% of those figures are included, and the reduced amounts then go through the standard W-2/UBIA test. Above the upper threshold, SSTB income gets no deduction at all. Non-SSTB income still qualifies, subject to the full W-2/UBIA limit.

Form 8995 or Form 8995-A

Use Form 8995 if your taxable income before the QBI deduction is at or below the threshold (approximately $203,000 single or $406,000 joint for 2026) and you’re not a patron of an agricultural or horticultural cooperative. This short form only asks for QBI, REIT dividends, and PTP income. You don’t need the W-2 or UBIA figures because the limits don’t apply to you.³

Use Form 8995-A if your taxable income exceeds the threshold or your situation involves cooperative patronage. This longer form contains the worksheets for the W-2/UBIA limitation and the SSTB phase-out. If you have multiple trades or businesses and want to aggregate them so their wages and property combine, Schedule B (Form 8995-A) must be completed first. Aggregation is only available when the same person or group owns at least 50% of each business, and none of them can be an SSTB.⁴

Whichever form you use, the final deduction lands on Form 1040, line 13a. It reduces taxable income, not AGI, so it will not lower phase-out calculations that key off AGI.

When Your K-1 Shows a Loss

Not every Code V statement carries positive QBI. If the business ran a net loss, that negative QBI must be netted against positive QBI from your other qualified businesses, allocated proportionally across the ones with positive amounts. If the overall total after netting is still negative, you get no QBI deduction that year (qualified REIT dividends and PTP income are calculated separately and are not zeroed out by a QBI loss). The remaining loss carries forward and reduces QBI in future years, whether or not the losing business is still operating.⁴

On Form 8995-A, netting and carryforward run through Schedule C. On Form 8995, any prior-year carryforward goes on line 3. Either way, tracking carryforward amounts is your responsibility. The IRS does not track them for you.

The Penalty Risk on QBI Errors

Section 199A errors carry a lower penalty trigger than most other return mistakes. The accuracy-related penalty is still 20% of the underpayment, but on returns claiming the QBI deduction the understatement only needs to exceed the greater of 5% of the correct tax or $5,000, rather than the usual 10% or $5,000.⁶

A missed SSTB phase-out or a mishandled W-2/UBIA limit can easily push you across that 5% line. The IRS can waive the penalty for reasonable cause, including good-faith reliance on a competent tax professional or on the information the K-1 furnished, but the burden of showing good faith is yours.⁷

1
Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) (2025)
2
IRS.gov. Shareholder’s Instructions for Schedule K-1 (Form 1120-S) (2025)
3
Internal Revenue Service. Instructions for Form 8995 (2025)
4
Internal Revenue Service. Instructions for Form 8995-A (2025)
5
GovInfo. 26 CFR 1.199A-1
6
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments
7
Internal Revenue Service. Accuracy-Related Penalty