How long can Section 199A QBI losses carry forward if my business is now dormant?

The rules around QBI loss carryforwards are actually pretty straightforward, though not widely understood. 1. Under Section 199A, QBI losses can be carried forward indefinitely. There's currently no expiration date in the tax code for these losses. They'll remain available until you have positive QBI to offset them against. 2. Regarding REITs - there's a common misconception here. While REIT dividends do qualify for the Section 199A deduction, they operate in a separate "bucket" from your business QBI. Your business losses won't offset REIT income for QBI purposes. The REIT income gets its own 20% deduction regardless of your business QBI situation. 3. The "closed" status of your business doesn't affect the carryforward of your QBI losses. As long as you maintain your licenses and could potentially resume operations, those losses remain valid for future use. Even if you fully close the business, the losses don't disappear - they'd be available if you started a similar business in the future. The key thing to remember is that QBI losses only benefit you when you eventually generate positive QBI. If you never return to self-employment or business ownership, those loss carryforwards won't provide any tax benefit.

After struggling with similar QBI carryforward questions for my own small business, I discovered a resource that saved me hours of research and confusion. I was going in circles trying to understand how my QBI losses would affect future tax years when I found https://taxr.ai - it analyzed my specific situation and explained exactly how my QBI carryforwards would work with my particular business structure. What was really helpful was how it broke down my options for maintaining my business entity vs. dissolving it completely, and the tax implications of each path. It even identified a few strategies I hadn't considered for potentially utilizing those QBI losses in the future. The document analysis feature saved me from making a costly mistake with how I was planning to record my business's "dormant" status.

I was really skeptical about automated tax tools as I mentioned above, but I gave taxr.ai a try after getting frustrated with inconsistent advice about my QBI situation. I'm actually amazed at how well it worked for my specific situation. I uploaded my previous years' returns and business documentation, and instead of getting generic advice, I received a detailed analysis specifically addressing my QBI carryforward situation. What really impressed me was that they identified that I had incorrectly calculated my QBI loss in 2022 because of some inventory adjustments I had made when scaling down operations. This wasn't something my regular accountant had caught! They paired me with a tax professional who specializes in businesses transitioning to dormancy, and he outlined several scenarios for how my QBI situation might play out depending on whether I restart operations in the next few years or pivot to a related business model.

If you're struggling to get through to the IRS about your QBI questions, I highly recommend using Claimyr (https://claimyr.com). I spent weeks trying to reach someone at the IRS who could answer my questions about Section 199A carryforwards when changing business structures, and kept getting disconnected or waiting for hours. I was really skeptical that any service could actually help with IRS wait times, but after watching their demo (https://youtu.be/_kiP6q8DX5c), I decided to give it a try. Claimyr got me connected to an IRS representative in under 30 minutes when I had been trying for days on my own. The agent was able to confirm the correct handling of my QBI losses and give me the specific documentation requirements for my situation.

Well, I've got to eat my words about Claimyr. After posting my skeptical comment above, I was still struggling with my QBI questions and couldn't get through to the IRS after multiple attempts. Out of desperation, I tried the service. I was genuinely shocked when they called me back in about 45 minutes with an actual IRS agent on the line. The agent walked me through the exactly how QBI losses carry forward when a business becomes temporarily inactive, and confirmed that my approach to maintaining my business license while not actively generating income wouldn't jeopardize my ability to use those QBI carryforwards in the future. The time and frustration saved was significant - I had already spent hours over several days trying to get through. Having tried both calling myself and using their service, I can confirm it absolutely works as advertised.

Something nobody has mentioned yet - have you considered starting a different type of business that might generate QBI? The losses carry forward even if you start something completely different from your previous business, as long as it generates qualified business income. I was in a similar situation - had about $37,000 in QBI losses from a failed retail business, then started a consulting side gig a few years later. Those old losses offset my new consulting income, which saved me a significant amount on taxes. Worth considering if you have skills that could translate to some freelance or consulting work.

Be careful about keeping a business technically "open" but dormant for too long. I did this and it created some unexpected complications: 1) Had to keep filing zero-income Schedule C forms each year 2) Some states (like California) have minimum franchise taxes even for inactive businesses 3) Had to maintain certain business licenses and registrations which cost money 4) Created confusion with local tax authorities If you don't realistically expect to restart the business within a year or two, sometimes it's cleaner to just close it properly and start fresh if needed later. Those QBI losses might never be usable if you're fully transitioned to W2 income anyway.

This is a great discussion that touches on something I dealt with recently. One thing worth considering is the interaction between QBI losses and the overall Section 199A deduction limitation based on your taxable income. Even if you do generate future QBI to offset those carryforward losses, remember that the Section 199A deduction is still limited to 20% of your taxable income minus net capital gains. So if you're earning W2 income and have other deductions that reduce your taxable income significantly, you might not be able to fully utilize the QBI benefit even when you do have positive qualified business income. I learned this the hard way when I started a small side business thinking I could immediately benefit from my old QBI losses. The math worked out differently than I expected because of the taxable income limitation. It's another factor to consider when deciding whether to keep a dormant business alive or just close it cleanly. Also, regarding the state-level complications others mentioned - some states don't follow federal QBI rules at all, so you could be maintaining a business entity for federal tax benefits that don't even apply at the state level where you might owe annual fees or taxes.