Do MLP investors get the 20% QBI deduction?

Yes. MLP investors may qualify for a 20% deduction on qualified business income under IRC §199A. The deduction was made permanent by the OBBBA. Whether you get the full deduction depends on taxable income relative to the phase-out thresholds.

Is the §199A deduction permanent?

Yes. The One Big Beautiful Bill Act (signed July 4, 2025) made §199A permanent. It was previously scheduled to sunset after 2025. The deduction now applies to all future tax years.

Where do I find QBI on my MLP K-1?

K-1 Box 20, code Z reports your allocable share of qualified business income from the PTP. Code AE may report UBIA or other §199A information. The deduction is calculated on Form 8995 or 8995-A.

What is the income limit for the MLP QBI deduction?

For 2025, the phase-out begins at approximately $197,300 (single) and $394,600 (MFJ). Below the threshold, full 20% deduction. Above the upper threshold, the PTP-specific rules may eliminate the deduction entirely. Thresholds are indexed for inflation annually.

Can I combine QBI from multiple MLPs?

No. Each PTP is calculated separately. QBI from EPD and ET cannot be combined. If one PTP has a QBI loss, it carries forward within that same PTP only — it does not offset QBI from other PTPs.

MLP §199A QBI Deduction: 20% Tax Break Explained

MLP investors may qualify for a 20% deduction on qualified business income under IRC §199A. The One Big Beautiful Bill Act made this permanent. For investors below the income threshold, the effective federal tax rate on partnership income drops from 37% to 29.6%. But PTPs have special rules.

By Lucas Andersen — Last updated March 6, 2026

What §199A Does for MLP Investors

20% deduction on qualified business income from pass-through entities, including PTPs/MLPs. Reduces taxable QBI — $1,000 of QBI becomes $800 taxable. Made PERMANENT by the OBBBA (signed July 4, 2025). Found on K-1 Box 20, codes Z and AE.

PTP-Specific Rules

For PTPs, the W-2 wage and UBIA safety valve does NOT exist. The deduction is based solely on your share of QBI. The income threshold is a hard cliff — below it, full 20%. Above it, you may get nothing. Most midstream MLPs are NOT “specified service trades or businesses” (SSTBs), which affects above-threshold treatment.

Income Thresholds (2025 Tax Year)

Single: ~$197,300 (phase-out begins) to ~$247,300 (fully phased out). MFJ: ~$394,600 to ~$494,600. Below the lower threshold: full 20% deduction. In the phase-out: partial deduction. Above: consult a tax advisor.

How to Claim It

K-1 Box 20, code Z = your QBI. Calculated on Form 8995 or 8995-A. Each PTP is calculated separately — cannot combine QBI from EPD and ET. QBI losses from one PTP carry forward within that PTP only.

Worked Example

MFJ, $300,000 taxable income. EPD: $400 QBI. ET: $200 QBI. MPLX: -$100 QBI (carries forward). Total deductible QBI: $600. Deduction: 20% × $600 = $120. Tax savings at 24%: $28.80. Scales with position size — $500K portfolio with $5,000 QBI saves ~$240/year.

§199A and §751: The Open Question

Can §199A apply to §751 recapture income on sale? Tax practitioners debate this. The IRS has not issued definitive guidance. Consult your tax advisor — do not assume the deduction applies or doesn’t.

Section 751 Recapture — Can §199A offset §751 income?
When Basis Reaches Zero — QBI deduction still applies at zero basis
Stepped-Up Basis at Death — The ultimate MLP tax strategy
EPD K-1 Guide — Typically generates positive QBI
ET K-1 Guide — Three entities with separate QBI
K-1 Basis Tracker — Track your K-1 data including QBI