Understanding the Qualified REIT/PTP Component and Its 20% Deduction

Tax filers with ties to the United States—including many immigrants and global investors—still have access to a separate slice of the Section 199A deduction that often goes unused: the qualified REIT/PTP component. As of September 7, 2025, this part of the QBI deduction remains available and, in many cases, easier to claim than the main business-income portion.

It equals 20% of the sum of qualified real estate investment trust dividends and qualified publicly traded partnership income, whether earned directly or through a relevant passthrough entity. The core point for taxpayers is simple: you can claim this 20% deduction even if you have no qualified business income from a trade or business.

And unlike the QBI component tied to a business, this REIT/PTP piece isn’t limited by W-2 wages or the unadjusted basis of property (UBIA)—except when the PTP income comes from a specified service trade or business (SSTB).

Practical effect for immigrant families and cross-border filers

For immigrant families investing in U.S. markets while building new lives, the practical effect is real.

• A school teacher on a work visa who owns REIT shares in a retirement or brokerage account may qualify for a 20% deduction on those dividends.
• A skilled worker with a small stake in a publicly traded partnership could qualify for the same treatment.
• The law allows this deduction whether you itemize or take the standard deduction, easing filing for those still learning the U.S. tax system.

Tax professionals highlight this as a steady benefit for investors who don’t own operating businesses but do receive qualifying REIT dividends or partnership income.

Background and current status

• The deduction was created by Congress for tax years beginning after December 31, 2017, and currently applies through the 2025 tax year.
• Officials had not announced changes by September 7, 2025, that would narrow the qualified REIT/PTP component.
• The IRS has updated instructions to clarify calculations and to confirm the wage and property limits don’t apply to this component.
• Industry groups and tax professionals continue to watch Congress and Treasury for any future moves.

Policy details that matter now

The qualified REIT/PTP component is separate from the business-focused QBI piece. Key distinctions:

• It equals 20% of qualified REIT dividends plus 20% of qualified PTP income, figured on the combined total.
• You can claim it even without any QBI from a trade or business.
• It is not subject to W‑2 wage or UBIA limits that can shrink or eliminate the business QBI deduction.
• Exception: if the PTP income is from an SSTB, restrictions can apply.

For 2025, SSTB-related income thresholds for the QBI limits are:

• $394,000 for joint filers and $197,300 for others; phase-outs to $494,600 and $247,300, respectively.

These thresholds don’t generally affect the REIT/PTP side, unless your PTP income is tied to an SSTB.

Overall cap that still applies

The Section 199A structure sets a cap that applies to the whole deduction. The allowed deduction is the lesser of:

1. The sum of the QBI component and the qualified REIT/PTP component, or
2. 20% of taxable income minus net capital gains

In practice, if an investor’s only qualifying income comes from REIT dividends and PTP allocations, the calculation is often straightforward: confirm the amounts, apply 20%, then check against the taxable-income cap.

What counts as “qualified” and important holding rules

IRS guidance and common practice note several guardrails:

• Qualified REIT dividends exclude capital gain dividends and qualified dividends taxed at preferential rates, and they require a holding period of more than 45 days.
• Qualified PTP income generally includes the taxpayer’s allocable share of income, gain, deduction, and loss from a partnership that isn’t taxed as a corporation, plus certain ordinary income adjustments tied to IRC Section 751.
• Income flowing through a relevant passthrough entity (RPE) also counts when figuring the 20% amount.
• If PTP income is from an SSTB, QBI limits may affect that partnership income.

How to claim the REIT/PTP component

The process is direct if you have the right year-end statements.

1. Identify qualified amounts:
   • REIT dividends from Form 1099‑DIV (Box 5).
   • PTP items from your Schedule K‑1 or broker’s consolidated year‑end statement.
2. Confirm the 45‑day holding period for REIT shares.

3. Compute 20% of the combined qualified REIT dividends and qualified PTP income, including amounts passed through from an RPE.

4. Combine with any QBI component you may have, then apply the cap of 20% of taxable income minus net capital gains.

5. Report on the applicable form:

   • Form 8995 (simplified) for eligible filers, or
   • Form 8995‑A (detailed) for those with complex situations or higher incomes.

The IRS provides two calculation paths through those forms and updates instructions each year.

Where to find official guidance

The IRS maintains a central page for the QBI deduction with eligibility guidance, filing steps, and links to forms and instructions. For official information, see the IRS Qualified Business Income Deduction page at https://www.irs.gov/newsroom/qualified-business-income-deduction.

Forms and instructions:
– Form 8995 and instructions
– Form 8995‑A and instructions

Use the latest version for the tax year you’re filing to ensure correct thresholds, examples, and definitions.

Practical tips for immigrant and cross-border filers

To avoid common errors and maximize the deduction:

• Keep all year‑end tax forms from your broker in one place; review Box 5 on Form 1099‑DIV for Section 199A dividends.
• If you own units in a PTP, wait for the Schedule K‑1 or broker’s K‑1 substitute package before filing; these often arrive later than standard 1099s.
• Watch for net losses from PTPs—these can affect your qualified total and may carry forward under partnership rules.
• If you have SSTB income and your taxable income is near or above the thresholds, confirm whether the PTP is an SSTB; if so, special limits may reduce the REIT/PTP benefit tied to that partnership income.
• If your only qualifying amounts are REIT dividends and PTP income, you usually won’t need wage or property‑basis data, simplifying the computation.

Final takeaway

The qualified REIT/PTP component was added so investors in real estate trusts and publicly traded partnerships could benefit alongside business owners. It has functioned as a practical tool for ordinary investors—including many immigrants building credit, learning U.S. tax rules, and saving for homes or education.

With the current rules in place through 2025, filing seasons remain important for families seeking lawful ways to reduce tax bills. If you receive REIT dividends or PTP income this year, the cleanest next steps are:

• Confirm which amounts qualify, verify the REIT holding period, and
• Select the correct IRS form (Form 8995 or 8995‑A).

For many filers, the 20% deduction from the qualified REIT/PTP component will be one of the simplest wins in the tax code—standing apart from the more complex QBI business calculations while still fitting under the same Section 199A umbrella.