Total Stock Market Index - Section 199A dividends this year

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
CoastalWinds
Posts: 1063
Joined: Sat Apr 06, 2019 8:28 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by CoastalWinds » Sun Feb 16, 2020 10:09 pm

50/50 wrote:
Thu Feb 06, 2020 4:10 pm
DrCheese wrote:
Thu Jan 23, 2020 3:04 pm
Can you post a screenscrape of how turbotax filled out Form 8995? Use fictitious numbers if you prefer.
Here are step by step directions.

On form 8995

Line 6, place Section 199a dividends from 1099-Div box 5 (in attached example, I had $5,000 in Section 199a dividends in Box 5)
Line 7, carryover from last year (should be 0)
Line 8, Line 6 plus line 7
Line 9 Multiple line 8 * .20
Line 10 Add line 5 + 9 (line 5 should be zero so you are just copying line 9)
Line 11 This is line 8b from 1040 (adjusted gross income $68,000) - line 9 from 1040 (standard deduction or deduction from Schedule A $12,200)
Line 12 Total of Capital Gains from Schedule D
Line 13 Subtract line 12 from line 11
Line 14 Multiple line 13 * .2 (this is your maximum Qualified Business Income Deduction)
Line 15 Enter the lessor of Line 10 or 14 (this is just the actual Qualified Business Income Deduction or the maximum Qualified Business Income Deduction whichever is lower)

That is it for form 8995.

On Form 1040, Put line 15 from form 8995 on line 10

Image Image
[/quote]

Thanks DrCheese, your post really helped me with this deduction. I appreciate you taking the time to do this in such detail.

50/50
[/quote]

I believe there is one typo in this. For line 12 “Net Capital Gain”, the instructions say that this is the sum of qualified dividends (from 1040 line 3a) plus the smaller of Line 15 or 16 from Schedule D.

Almost there
Posts: 927
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: Total Stock Market Index - Section 199A dividends this year

Post by Almost there » Mon Feb 17, 2020 8:47 pm

From: 2019 1099-DIV for VTSAX-Total Stock received from Vanguard
Box 1a: 1,485.25
Box 1b: 1,393.02
Box 5: 86.89
All other boxes: 0

From: Form 8995 and given by HRB:
Line 1-5: 0
Line 6: 87
Line 7: 0
Line 8: 87
Line 9: 17
Line 10: 17
Line 11: 10,353
Line 12: 1,478
Line 13: 8,875
Line 14: 1,775
Line 15: 17
Line 16: 0
Line 17: 0

From: HRB
You’re getting the new qualified business income deduction!
Rest estate investment trust (REIT) dividends $87 / box 5
Total qualified business income $87
Taxable income minus net capital gains $8,875
Your 2019 deduction $17

Hopefully it'll help someone.

Almost there

CoastalWinds
Posts: 1063
Joined: Sat Apr 06, 2019 8:28 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by CoastalWinds » Mon Feb 17, 2020 9:06 pm

Almost there wrote:
Mon Feb 17, 2020 8:47 pm
From: 2019 1099-DIV for VTSAX-Total Stock received from Vanguard
Box 1a: 1,485.25
Box 1b: 1,393.02
Box 5: 86.89
All other boxes: 0

From: Form 8995 and given by HRB:
Line 1-5: 0
Line 6: 87
Line 7: 0
Line 8: 87
Line 9: 17
Line 10: 17
Line 11: 10,353
Line 12: 1,478
Line 13: 8,875
Line 14: 1,775
Line 15: 17
Line 16: 0
Line 17: 0

From: HRB
You’re getting the new qualified business income deduction!
Rest estate investment trust (REIT) dividends $87 / box 5
Total qualified business income $87
Taxable income minus net capital gains $8,875
Your 2019 deduction $17

Hopefully it'll help someone.

Almost there
What were the amounts on your Form 1040 Line 3a and Line 6? Did you file Schedule D?

RubyTuesday
Posts: 469
Joined: Fri Oct 19, 2012 11:24 am

Re: Total Stock Market Index - Section 199A dividends this year

Post by RubyTuesday » Mon Feb 17, 2020 9:12 pm

runner26 wrote:
Fri Feb 14, 2020 4:28 pm
Just got a new software update from H&R Block. The 8995 problem of not correctly reporting the deduction was fixed. Line 10 on 1040 is now being populated. :sharebeer
I updated today and it’s still not updating line 10 with anything other than zero. I’m on a Mac.


May I ask if you’re Mac or PC?

Did you do anything to get the 8995 to populate correctly?

Thanks
RT
“Doing nothing is better than being busy doing nothing.” – Lao Tzu

RubyTuesday
Posts: 469
Joined: Fri Oct 19, 2012 11:24 am

Re: Total Stock Market Index - Section 199A dividends this year

Post by RubyTuesday » Mon Feb 17, 2020 9:31 pm

RubyTuesday wrote:
Mon Feb 17, 2020 9:12 pm
runner26 wrote:
Fri Feb 14, 2020 4:28 pm
Just got a new software update from H&R Block. The 8995 problem of not correctly reporting the deduction was fixed. Line 10 on 1040 is now being populated. :sharebeer
I updated today and it’s still not updating line 10 with anything other than zero. I’m on a Mac.


May I ask if you’re Mac or PC?

Did you do anything to get the 8995 to populate correctly?

Thanks
RT
Just found post on early-retirement.org indicating the Mac update of H&R Block for the 8995/QBI issue will be in 2/20 update.

https://www.early-retirement.org/forum ... 02157.html
“Doing nothing is better than being busy doing nothing.” – Lao Tzu

PinotGris
Posts: 708
Joined: Tue Feb 14, 2012 9:38 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by PinotGris » Mon Feb 17, 2020 10:42 pm

HANK1964 wrote:
Sat Feb 15, 2020 7:28 pm
When I talked to the rep at Vanguard he told me that Vanguard had the ability, starting in 2018, to report entries in Box 5 for Total Stock Market Admiral but didn’t. He did not know why. He did not give me the impression that he knew Vanguard would reissue 1099-DIVs for 2018 to handle this.
Thank you, I was going to call Vanguard about it. It is not just VTSAX, a few other funds we hold have the QBI deduction this year which adds up to a nice sum. Which means we lost out on that last year because ... Vanguard did not report it?

User avatar
abuss368
Posts: 19670
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Total Stock Market Index - Section 199A dividends this year

Post by abuss368 » Mon Feb 17, 2020 11:32 pm

PinotGris wrote:
Mon Feb 17, 2020 10:42 pm
HANK1964 wrote:
Sat Feb 15, 2020 7:28 pm
When I talked to the rep at Vanguard he told me that Vanguard had the ability, starting in 2018, to report entries in Box 5 for Total Stock Market Admiral but didn’t. He did not know why. He did not give me the impression that he knew Vanguard would reissue 1099-DIVs for 2018 to handle this.
Thank you, I was going to call Vanguard about it. It is not just VTSAX, a few other funds we hold have the QBI deduction this year which adds up to a nice sum. Which means we lost out on that last year because ... Vanguard did not report it?
Is this all related to the REIT portion of the dividend?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

infinitejustice
Posts: 14
Joined: Sun Feb 24, 2019 5:51 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by infinitejustice » Tue Feb 18, 2020 2:00 am

Just want to thank everybody for this thread... :beer

rkhusky
Posts: 9276
Joined: Thu Aug 18, 2011 8:09 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by rkhusky » Tue Feb 18, 2020 8:15 am

PinotGris wrote:
Mon Feb 17, 2020 10:42 pm
Thank you, I was going to call Vanguard about it. It is not just VTSAX, a few other funds we hold have the QBI deduction this year which adds up to a nice sum. Which means we lost out on that last year because ... Vanguard did not report it?
I think the law or IRS guidance changed. It appears that Form 8995 is new for 2019 (at least earlier versions do not show up in the IRS's prior year forms page).

The Section 199A deduction was enacted as part of the Tax Cuts and Jobs Act of 2017 that was signed by President Trump. I note that there was a QBI deduction in the 2018 form 1040 on Line 9, with an accompanying worksheet in the 1040 instructions that includes qualified REIT dividends on Line 6 of the worksheet. But the instructions don't mention anything about dividends from a Regulated Investment Company (RIC), whereas the 2019 Form 8995 does mention RIC's. So, perhaps new IRS guidance for 2019.

Almost there
Posts: 927
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: Total Stock Market Index - Section 199A dividends this year

Post by Almost there » Tue Feb 18, 2020 1:12 pm

CoastalWinds wrote:
What were the amounts on your Form 1040 Line 3a and Line 6? Did you file Schedule D?
1040
Line 3a: 1393 (from 1099-DIV, Box 1b from Total Stock VTSAX)
Line 6: 85 (from 1099-DIV, Box 2a from Long-term Tax-exempt fund VWLTX)

I have not filed as yet since HRB is indicating another update in March. Looked at Schedule D and Line 13 also indicates 85.

Please let me know if you have further questions.

Almost there

JimInIllinois
Posts: 385
Joined: Wed Dec 22, 2010 9:55 am

Re: Total Stock Market Index - Section 199A dividends this year

Post by JimInIllinois » Tue Feb 18, 2020 10:47 pm

rkhusky wrote:
Tue Feb 18, 2020 8:15 am
PinotGris wrote:
Mon Feb 17, 2020 10:42 pm
Thank you, I was going to call Vanguard about it. It is not just VTSAX, a few other funds we hold have the QBI deduction this year which adds up to a nice sum. Which means we lost out on that last year because ... Vanguard did not report it?
I think the law or IRS guidance changed. It appears that Form 8995 is new for 2019 (at least earlier versions do not show up in the IRS's prior year forms page).

The Section 199A deduction was enacted as part of the Tax Cuts and Jobs Act of 2017 that was signed by President Trump. I note that there was a QBI deduction in the 2018 form 1040 on Line 9, with an accompanying worksheet in the 1040 instructions that includes qualified REIT dividends on Line 6 of the worksheet. But the instructions don't mention anything about dividends from a Regulated Investment Company (RIC), whereas the 2019 Form 8995 does mention RIC's. So, perhaps new IRS guidance for 2019.
From the instructions for 2018 Form 1040:
Qualified REIT dividends include any dividend you receive from a real estate investment trust held for more than 45 days and for which the payment is not obligated to someone else and that is not a capital gain dividend or qualified dividend plus your qualified REIT dividends received from a regulated investment company. This amount is reported to you on Form 1099-DIV, line 5.

rkhusky
Posts: 9276
Joined: Thu Aug 18, 2011 8:09 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by rkhusky » Wed Feb 19, 2020 8:16 am

JimInIllinois wrote:
Tue Feb 18, 2020 10:47 pm
From the instructions for 2018 Form 1040:
Qualified REIT dividends include any dividend you receive from a real estate investment trust held for more than 45 days and for which the payment is not obligated to someone else and that is not a capital gain dividend or qualified dividend plus your qualified REIT dividends received from a regulated investment company. This amount is reported to you on Form 1099-DIV, line 5.
Interesting. The only mention of the word "regulated" in my copy of the 2018 1040 instructions is for Line 2a - Tax-Exempt Interest (when I search the .pdf). My .pdf is dated 12/10/18.

edit: The 1040 instructions dated 1/24/19 does has the text above on pg 36. Was Vanguard the only brokerage that missed this change? I never received an updated 1099-DIV.
Last edited by rkhusky on Wed Feb 19, 2020 8:22 am, edited 1 time in total.

User avatar
abuss368
Posts: 19670
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Total Stock Market Index - Section 199A dividends this year

Post by abuss368 » Wed Feb 19, 2020 8:20 am

CoastalWinds wrote:
Sun Feb 16, 2020 10:09 pm
50/50 wrote:
Thu Feb 06, 2020 4:10 pm
DrCheese wrote:
Thu Jan 23, 2020 3:04 pm
Can you post a screenscrape of how turbotax filled out Form 8995? Use fictitious numbers if you prefer.
Here are step by step directions.

On form 8995

Line 6, place Section 199a dividends from 1099-Div box 5 (in attached example, I had $5,000 in Section 199a dividends in Box 5)
Line 7, carryover from last year (should be 0)
Line 8, Line 6 plus line 7
Line 9 Multiple line 8 * .20
Line 10 Add line 5 + 9 (line 5 should be zero so you are just copying line 9)
Line 11 This is line 8b from 1040 (adjusted gross income $68,000) - line 9 from 1040 (standard deduction or deduction from Schedule A $12,200)
Line 12 Total of Capital Gains from Schedule D
Line 13 Subtract line 12 from line 11
Line 14 Multiple line 13 * .2 (this is your maximum Qualified Business Income Deduction)
Line 15 Enter the lessor of Line 10 or 14 (this is just the actual Qualified Business Income Deduction or the maximum Qualified Business Income Deduction whichever is lower)

That is it for form 8995.

On Form 1040, Put line 15 from form 8995 on line 10

Image Image
Thanks DrCheese, your post really helped me with this deduction. I appreciate you taking the time to do this in such detail.

50/50
[/quote]

I believe there is one typo in this. For line 12 “Net Capital Gain”, the instructions say that this is the sum of qualified dividends (from 1040 line 3a) plus the smaller of Line 15 or 16 from Schedule D.
[/quote]

Do you hold REITs in a taxable account?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
siamond
Posts: 5411
Joined: Mon May 28, 2012 5:50 am

Re: Total Stock Market Index - Section 199A dividends this year

Post by siamond » Wed Feb 19, 2020 5:53 pm

Count me as another individual who was quite puzzled to discover a Qualified Business Income deduction, which I tracked to REITs (form 8895 filled by Turbotax), which I tracked to the 1099-DIV reported by E*Trade, which now reports such $$ as part of the so-called 'section 199A dividends'... None of that was familiar to me an hour ago.. :shock:

I guess this comes from some REIT dividends being paid as part of my taxable position in Vanguard VTI... Ok, er, why not, I certainly don't mind the unexpected deduction! :beer

JonnyB
Posts: 505
Joined: Sun Jan 19, 2020 5:28 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by JonnyB » Wed Feb 19, 2020 10:16 pm

CoastalWinds wrote:
Sun Feb 16, 2020 10:09 pm
I believe there is one typo in this. For line 12 “Net Capital Gain”, the instructions say that this is the sum of qualified dividends (from 1040 line 3a) plus the smaller of Line 15 or 16 from Schedule D.
You are correct. You must subtract qualified dividends and long term capital gains from your taxable income eligible for the QBI deduction because qualified dividends and long term capital gains already have a 20% tax rate. You don't get to reduce twice.

The QBI deduction only applies to ordinary income such as earnings, non-qualified dividends and short-term capital gains -- and after subtracting your standard deduction.

It is quite possible for retired people to have no qualified income to deduct from since they have no earnings and their other ordinary income is zero after subtracting the standard deduction. That is, the income limitation on line 14 of Form 8995 is zero.

Almost there
Posts: 927
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: Total Stock Market Index - Section 199A dividends this year

Post by Almost there » Thu Feb 20, 2020 1:28 pm

JonnyB wrote:
It is quite possible for retired people to have no qualified income to deduct from since they have no earnings and their other ordinary income is zero after subtracting the standard deduction. That is, the income limitation on line 14 of Form 8995 is z
Though I am retired and have no income, My line 14 on Form 8995 states $1,775, Line 15 $17, line 16 + 17 state $0.

Almost there

Topic Author
Makefile
Posts: 219
Joined: Fri Apr 22, 2016 11:03 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by Makefile » Thu Feb 20, 2020 2:14 pm

JonnyB wrote:
Wed Feb 19, 2020 10:16 pm
It is quite possible for retired people to have no qualified income to deduct from since they have no earnings and their other ordinary income is zero after subtracting the standard deduction. That is, the income limitation on line 14 of Form 8995 is zero.
This situation would be an opportunity to do Roth conversions at an 8% tax rate, no?

Almost there
Posts: 927
Joined: Thu Jan 03, 2008 7:06 pm
Location: Arizona USA

Re: Total Stock Market Index - Section 199A dividends this year

Post by Almost there » Thu Feb 20, 2020 2:20 pm

Makefile wrote:
This situation would be an opportunity to do Roth conversions at an 8% tax rate, no?
Maybe so but not for me since I live just on Social Security and my RMDs are close to $20K. When I looked into doing backdoor Roth conversions, it would have been $1,000 for $5,000 conversion. Much too expensive and not worth it to me.

Almost there

JonnyB
Posts: 505
Joined: Sun Jan 19, 2020 5:28 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by JonnyB » Thu Feb 20, 2020 4:34 pm

Makefile wrote:
Thu Feb 20, 2020 2:14 pm
JonnyB wrote:
Wed Feb 19, 2020 10:16 pm
It is quite possible for retired people to have no qualified income to deduct from since they have no earnings and their other ordinary income is zero after subtracting the standard deduction. That is, the income limitation on line 14 of Form 8995 is zero.
This situation would be an opportunity to do Roth conversions at an 8% tax rate, no?
Well, technically true, but as people have pointed out, unless you have an extremely large amount of dividends, the QBI deduction is typically from $10 to maybe $1000, hardly a windfall.

beehivehave
Posts: 466
Joined: Thu Aug 08, 2019 1:21 pm

Re: Total Stock Market Index - Section 199A dividends this year

Post by beehivehave » Sat Mar 07, 2020 3:42 pm

I sure am glad they "simplified" tax returns. Instead, they made it more complicated and simplified nothing beyond raising the standard deduction. Thank you, lobbyists for special interests. Without software it is requires a lot of extra forms and understanding complicated instructions - and I really wonder if the software is consistently accurate.

Post Reply