QBI 199A Aggregation: Ownership, Year Matching, and Integration Rules

This step-by-step guide walks you through how to treat more than one trade or business as a single, aggregated activity for the Section 199A Qualified Business Income (QBI) deduction. It explains the full journey from deciding whether aggregation helps, to making the election, to staying compliant year after year. The goal is to help you plan, avoid mistakes, and know what to expect at each stage while you work toward the best QBI result—especially if one business has W-2 wages and another does not.

Big-picture process overview

• Decide if your trades or businesses can be aggregated under the IRS rules in 26 CFR § 1.199A-4.
• Confirm the tests: same person/group owns ≥50% of each trade/business for most of the year; tax years match; none is a Specified Service Trade or Business (SSTB); and at least two of the three integration factors apply.
• Elect aggregation and disclose it on the required schedule for the QBI deduction.
• Combine QBI, W-2 wages, and UBIA of qualified property across the aggregated group before applying QBI limits.
• Keep records and report the same aggregation every year unless facts change.

The IRS has not changed these rules in 2024 or 2025. The existing final regulations still control how taxpayers aggregate trades or businesses for the QBI deduction.

Stage 1: Decide whether aggregation is useful

What to do:
– List each trade or business you run directly or through pass-through entities.
– Note which ones have W-2 wages and which do not.
– Consider whether treating them as one aggregated trade/business would raise your QBI deduction by pooling wages and qualified property.

What to expect from authorities:
– The IRS allows aggregation only if all tests are met. If you choose to aggregate, you must stick with it in later years unless you no longer meet the rules.

Why this matters:
– Aggregation can help when one business has few or no W-2 wages and another has enough wages or qualified property to support a larger QBI deduction.

Stage 2: Confirm ownership and tax-year alignment

Required actions:
– Check the same person or group owns 50% or more of each trade or business, directly or indirectly.
– Make sure that ownership at this level exists for a majority of the taxable year in which income items are included.
– Confirm that all items from the trades or businesses are reported on returns with the same taxable year (ignoring short years).

What the rules say:
– Ownership attribution applies under Sections 267(b) and 707(b), which can include family members (spouses, children, grandchildren, parents).
– If tax years don’t match, you cannot aggregate.

What to expect:
– The IRS looks for clear proof of common ownership and aligned tax years before it will accept an aggregated election.

Stage 3: Screen out SSTBs

Required actions:
– Verify that none of the trades or businesses is a Specified Service Trade or Business (SSTB).

What the rules say:
– If any business in the group is an SSTB, aggregation is not allowed under Section 199A’s aggregation rules.

What to expect:
– If an SSTB is present, keep it separate and compute QBI limits without aggregation.

Stage 4: Check the two-of-three integration factors

Required actions:
Confirm at least two of the following are true:
1. The trades or businesses offer products or services that are the same or customarily offered together.
2. The trades or businesses share facilities or centralized business elements, such as personnel, accounting, legal, manufacturing, purchasing, human resources, or IT resources.
3. The trades or businesses are run in coordination with, or reliance upon, one or more of the businesses in the group (for example, supply chain links).

What to expect:
– The IRS expects documented facts. Keep clear records showing how your operations satisfy at least two of these factors.

Stage 5: Make the aggregation election and disclose

Required actions:
– Make the election to aggregate and disclose the aggregation on the QBI form for your return. For complex cases, that’s typically Form 8995-A with the required schedule for aggregation disclosure.
– Keep the same aggregation in later years unless you no longer meet the rules.

Where to find official forms:
– See IRS instructions and schedules for the QBI deduction, including aggregation disclosure on Form 8995-A and its Schedule B, on the IRS website: Form 8995-A, Qualified Business Income Deduction – IRS.

What to expect:
– The IRS stresses consistent reporting. Elect to aggregate for one year and report it the same way in later years unless facts change.

Stage 6: Combine QBI, W-2 wages, and UBIA before limits

Required actions:
– For each trade or business in the aggregated group, add together:
– Qualified Business Income (QBI),
– W-2 wages, and
– UBIA (unadjusted basis immediately after acquisition) of qualified property.
– Apply the QBI wage and property limits to the combined figures.

Why this matters:
– You must aggregate these items before applying the limits. Aggregation helps when one business lacks wages and another has sufficient wages or property to support a larger deduction.

Stage 7: Keep records and prepare for IRS review

Required actions:
– Preserve proof of ownership percentages, timing, and the same taxable year.
– Keep written support for why at least two integration factors apply.
– Retain payroll records showing W-2 wages and asset schedules showing UBIA of qualified property.

What to expect:
– The IRS applies a strict reading of the rules. If you aggregate, be ready to show your facts and your math.

Common real-world scenarios

• One business has no employees and no W-2 wages, but another business in the group has steady payroll and owns equipment. If ownership, timing, non-SSTB status, and two-of-three factors are met, the businesses may be aggregated. Pooling wages and property can increase the overall QBI deduction compared with computing each trade or business separately.
• Two related businesses share a warehouse, accounting staff, and vendor contracts and operate in a linked supply chain. These shared elements often help satisfy the two-of-three integration test, assuming the other rules are met.

According to analysis by VisaVerge.com, taxpayers see the most benefit when one entity with low or no wages is paired with another that has strong payroll and qualified property—but the election only works if every rule for aggregation is satisfied and properly disclosed.

Ongoing compliance and changes over time

What you do:
– Report the same aggregated group every year after you elect, unless facts change so you no longer meet the rules.
– If you start or buy a new trade or business, you may add it to the existing aggregated group if it meets all tests; otherwise, keep it separate.

What to expect:
– If facts change so much that you fail the tests (for example, ownership drops below 50% for most of the year; tax years no longer match; or one activity becomes an SSTB), you must stop the aggregation for that year.

Audit posture and risk control

What you do:
– Ensure all items from the aggregated trades or businesses are reported on returns with the same taxable year.
– Keep copies of your aggregation disclosure and the math behind combining QBI, W-2 wages, and UBIA before applying limits.
– Maintain clear notes on how you meet at least two integration factors.

What to expect:
– The IRS enforces the final regulations and expects careful disclosure. Missing or weak support can lead to disallowance of the QBI deduction for the aggregated group.

Key rules to remember (quick check)

• Ownership: Same person or group owns 50% or more of each trade or business for most of the year.
• Tax years: All items are reported on returns with the same taxable year (ignoring short years).
• No SSTB: None of the trades or businesses is an SSTB.
• Integration: At least two of the three integration factors apply.
• Election and consistency: You must elect to aggregate and then report the same aggregation in later years unless facts change.
• Calculation: Combine QBI, W-2 wages, and UBIA of qualified property across the aggregated group before applying limits.

Official reference and help

• Read the aggregation regulation at the legal source here: 26 CFR § 1.199A-4 (eCFR).
• For QBI forms and instructions, including aggregation disclosure, see the IRS page for Form 8995-A: Form 8995-A, Qualified Business Income Deduction – IRS.

Managing expectations

• There were no major changes to the aggregation rules in 2024 or 2025. The final rules still apply, and the IRS expects consistent disclosures year to year.
• Expect strict review of the ownership, timing, and integration tests. Plan ahead so you can show how your trades or businesses meet the rules.
• If your facts support aggregation and you make a clean election, combining QBI, W-2 wages, and UBIA can help raise your deduction when one trade or business is light on wages or property and another has enough to support the limit.

Focus on confirming you qualify, electing properly, combining the numbers the right way, and staying consistent in later years. When in doubt, review the regulation text and the IRS instructions tied to your QBI form, and keep careful records that match each rule above.