Form 8995 A Schedule C Loss Netting and Carryforward (2023)

Schedule C of Form 8995-A helps offset losses from one qualified business income (QBI) against profits from others, minimizing taxable income. It also facilitates carrying forward unused losses to future tax years.

Understanding the Purpose of Schedule C (Form 8995-A):

• Schedule C is part of Form 8995-A, used by taxpayers claiming the QBI deduction under the Tax Cuts and Jobs Act (TCJA).
• It's crucial for businesses with both profitable and unprofitable activities.
• It facilitates "loss netting," where losses from one business offset QBI from another, potentially reducing taxable income.

Schedule C (Form 8995-A): An Overview

Eligibility:

You must use Schedule C if:

A. Any of your businesses have a qualified business loss for the current year.

B. You have a qualified business loss carryforward from prior years.

Loss Netting:

• Calculate the qualified business income (QBI) for each of your businesses.
• Losses from one business offset the QBI from another in proportion to their respective QBI amounts.
• This reduces your overall QBI and potentially your taxable income.

Carryforward:

• Any unused qualified business losses can be carried forward to future tax years.
• This allows you to offset future profits with past losses, potentially reducing your tax burden over time.

Key Points to Remember About Schedule C (Form 8995-A):

• Schedule C only deals with QBI, not ordinary losses.
• Unaggregated businesses: Each business is considered separate for netting and carryforward purposes.
• Aggregation: If you choose to aggregate businesses, net them as a combined entity before individual business netting.
• QNLC limitations: There are restrictions on using QNLCs, especially for high-income taxpayers. Consult a tax professional for details.

For the current year's Schedule C (Form 8995-A), click here.