Is Box 20 Code AE the §199A QBI deduction?

No. Box 20 Code AE is Excess Taxable Income (ETI) for §163(j) purposes — it flows to Form 8990 Schedule A, not the §199A QBI screen. Box 20 Code Z is the QBI information code. Mistaking AE for QBI is the single most common Box 20 error on MLP K-1 walkthroughs and can cause taxpayers to enter §163(j) data on the wrong tax-software screen.

Where does §751 ordinary income (depreciation recapture) appear on Box 20?

Box 20 Code AB, in addition to the Sales Schedule that ships with your final K-1 — the Sales Schedule is the canonical source. Code AH is sometimes confused with §751, but Code AH is noncash charitable contributions — completely unrelated to §751. The §751 amount is sale-year only and determines how much of your gain is taxed at ordinary rates (up to 37%) instead of long-term capital gain rates.

What is the difference between Box 20 Code AC and Code AD?

Code AC is §1(h)(5) collectibles gain — taxed at the 28% collectibles rate (rare for midstream MLPs; relevant for partnerships holding art, coins, or precious metals). Code AD is §1(h)(6) unrecaptured §1250 gain — taxed at up to 25% (depreciation on real property). The two are distinct concepts at distinct rates; collectibles are NOT §1250.

Where do I enter Box 20 Code N (BIE)?

Box 20 Code N reports your share of the partnership’s Business Interest Expense subject to the §163(j) limitation. It flows to Form 8990 (your individual §163(j) computation). On the partner basis worksheet, Code N appears twice: as a positive addback on Line 4n (gross restoration of pre-BIE income) and as a basis-limited deduction on Line 15q. The two do not cancel out — the addback is unconditional, the deduction is allocated within the BIE loss class.

Why does my K-1 show Box 20 codes that aren’t printed in the IRS instructions?

The IRS reserves codes through ZZ and uses ZZ as a catch-all for items the partnership wants to disclose without a dedicated code. Each partnership’s supplemental statement defines what its specific ZZ amount represents. Always read the partnership’s own legend before entering a ZZ amount. Starting in TY2025, the §1062 farmland gain election (OBBBA) is reported via ZZ.

Schedule K-1 Box 20 Codes — Reference for MLP Investors (TY2025)

Box 20 carries the K-1 codes that most often get mis-entered. Code Z is QBI; Code AE is §163(j) Excess Taxable Income — they are not the same. Code AB is §751 gain; Code AH is noncash charitable contributions — they are not the same. This page is the canonical reference; per-MLP guides on this site link here so the codes never drift.

By Lucas Andersen — Last updated May 5, 2026

Why Box 20 Mislabels Are the Most Common K-1 Error

Box 20 of Schedule K-1 (Form 1065) reports “Other Information” — partnership-level data that does not fit elsewhere on the K-1 but still affects your individual return. Each lettered code maps to a specific IRS-prescribed form, schedule, or worksheet line. Mismapping a code routes the dollar amount to the wrong screen in tax software, which usually produces a wrong number on the return.

Three confusions appear repeatedly across MLP-focused content:

Code AE mistaken for §199A QBI. AE is Excess Taxable Income for §163(j); QBI is Code Z.
Code AH mistaken for §751 gain. AH is noncash charitable contributions; §751 is Code AB.
Code AC described as §1250 gain. AC is §1(h)(5) collectibles gain (28% rate); unrecaptured §1250 gain is Code AD.

Codes shift between tax years. The IRS adds, retires, and reassigns letters periodically. Always cross-reference the year on your K-1 against the corresponding year’s Partner’s Instructions for Schedule K-1 (Form 1065). Codes on this page reflect TY2024 / TY2025 instructions.

Codes That Matter Most for MLP Investors

Most retail MLP K-1s populate only a handful of Box 20 codes. The seven below cover the ordinary case for midstream and energy MLPs.

Box 20 codes most commonly populated on midstream / energy MLP K-1s, with the IRS-prescribed destination.
Code	Name	What it is	Where it goes
N	Business Interest Expense (BIE)	Your share of partnership-level interest expense subject to §163(j).	Form 8990; basis worksheet line 4n addback & line 15q deduction.
V	Unrelated Business Taxable Income	UBTI for tax-exempt partners (e.g., IRAs). Triggers Form 990-T at >$1,000.	Form 990-T (filed by IRA custodian).
Z	§199A information (QBI)	Qualified PTP income, W-2 wages, UBIA — data for the §199A 20% deduction.	§199A QBI screen / Form 8995 or 8995-A.
AB	§751 gain (loss)	Sale-year ordinary income from depreciation recapture — the “hot asset” portion of your gain.	Form 4797; ordinary-income line of return (taxed up to 37%).
AE	Excess Taxable Income (§163(j))	ETI passed through from the partnership’s §163(j) computation. Increases your individual §163(j) limit.	Form 8990 Schedule A. NOT §199A.
AF	Excess Business Interest Income (§163(j))	EBII passed through from the partnership’s §163(j) computation.	Form 8990 Schedule A.
AH	Noncash charitable contributions	Partnership-level noncash contribution allocated to you. NOT §751.	Schedule A (itemized) & Form 8283 if >$500.

Codes AC (§1(h)(5) collectibles, 28% rate) and AD (§1(h)(6) unrecaptured §1250 gain, up to 25% rate) appear only on partnerships holding the relevant asset classes — uncommon for pure midstream MLPs but possible for diversified or royalty partnerships. ZZ is the partnership-defined catch-all and includes the §1062 farmland gain election starting TY2025 (OBBBA).

The Three Confusions, Resolved

1. Code Z (QBI) vs Code AE (ETI)

Both codes carry information that supplements other forms, and both appear on the supplemental statement rather than the K-1 face. That superficial similarity is where the confusion enters. Z is the §199A QBI information needed for your 20% qualified-business-income deduction; AE is the §163(j) Excess Taxable Income that increases the cap on your individual business-interest deduction. Different code, different framework, different form.

Practical impact: putting AE on the §199A QBI screen overstates your QBI deduction by the AE amount and leaves your §163(j) limitation undercomputed on Form 8990. If you have BIE in the same year (Code N), you may forgo a deduction you were entitled to.

2. Code AB (§751) vs Code AH (noncash charitable)

§751 ordinary income is the highest-stakes number on a sale-year K-1 — it determines how much of your gain is taxed at ordinary rates up to 37% instead of preferential capital gains rates (0/15/20%). High-income filers may additionally owe the 3.8% Net Investment Income Tax under §1411, bringing the effective top rate to 23.8%. The IRS prescribes Code AB for §751 gain (loss). Code AH is noncash charitable contributions and is wholly unrelated.

Practical impact: a sale-year holder looking on Code AH for the §751 number will either find a charitable amount (and incorrectly recharacterize it) or find nothing (and skip the recapture entirely, underpaying tax and triggering a CP2000 when the IRS cross-references the K-1 file).

3. Code AC (§1(h)(5) collectibles) vs §1250 gain

§1(h)(5) collectibles gain is a 28%-rate category for art, coins, stamps, and certain precious metals. §1250 unrecaptured gain is an up-to-25%-rate category for depreciation on real property. They are different categories at different rates. Code AC is collectibles; Code AD is unrecaptured §1250. Labeling AC as “collectibles (§1250)” conflates two distinct rate buckets.

How to Read Box 20 on Your K-1 Supplemental Statement

The K-1 face only shows the code letter and dollar amount for Box 20. The legend — what each code actually means — lives on the partnership’s supplemental statement (sometimes labeled “Statement A” or “K-1 Footnotes”), several pages deep in the K-1 packet. Always read the supplemental.

Locate the Box 20 entries on page 1 of your K-1. You will see code letters with dollar amounts.
Flip to the supplemental statement. Find the matching letter. Read the partnership’s legend.
For Code Z (§199A): the supplemental will break down qualified PTP income, W-2 wages, and UBIA by trade or business. Enter each separately on the §199A screen.
For Code AE / AF (§163(j)): the supplemental gives the dollar amount that flows to Form 8990 Schedule A.
For Code ZZ: the supplemental defines what the partnership chose to disclose. Don’t guess.

If the supplemental statement’s description of a code disagrees with the IRS Partner’s Instructions for that tax year, the IRS instructions control. A partnership cannot redefine an IRS-prescribed code. (In practice this is rare; partnerships usually misalign formatting, not code semantics.)

Source of Truth

The authoritative source for Box 20 code definitions is the IRS Partner’s Instructions for Schedule K-1 (Form 1065) for the relevant tax year. Codes are reassigned periodically — always confirm against the year of the K-1 in front of you. This page reflects TY2024 / TY2025 (TY2025 first incorporates the OBBBA changes, including the §1062 farmland gain election under Code ZZ).

This article is for educational purposes. It does not constitute tax, legal, or investment advice. Consult your tax advisor for your specific situation.

Section 751 Recapture — Code AB explained in full
§199A QBI Deduction — Code Z and the qualified PTP income deduction
MLP in an IRA — UBTI — Code V and the $1,000 threshold
K-1 Basis Worksheet Explained — How Box 20 codes feed the basis worksheet
Box 19 Distributions — Distributions and the §731(a) test
TurboTax K-1 Guide — Where each code goes in TurboTax
PTP Passive Loss Rules — §469(k) silo and Form 8582
K-1 Basis Tracker — Free IRS worksheet calculator