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Rental Property and the Qualified Business Income Deduction

The IRS finalized the safe harbor rule that allows rental real estate activities to be treated as a trade or business for purposes of the qualified business income deduction (QBI) in September 2019.

A rental activity can be considered as a trade or business for QBI purposes if it meets all of the following:

  • Separate books and records are maintained
  • The following number of hours devoted to the rental activity must have been performed:
    • In existence less than 4 years – 250 hours each year
    • 4 years or more: 250 hours at least 3 of the past 5 years
  • Must maintain contemporaneous records

If the rental activity qualifies the taxpayer must attach a statement to their return that includes the following:

  • A description of all rental real estate property or properties (including the address and rental category) that qualify for the safe harbor
  • A description of real estate properties acquired or disposed of during the taxable year
  • A statement that the requirements for the safe harbor have been satisfied.

For more information see the following:

Mark Castro, CPA

Mark Castro, CPA

Mark has been with CrossLink Professional Tax Solutions (CPTS) since 2008, but has been in the tax industry since 1990. As the government/tax industry liaison for CPTS, Mark has been very active in working with the IRS, States, and other tax industry members to help improve communications, promote standardization, and simplification of eFile systems. Mark has also been active with industry associations as a board member of the National Association of Computerized Processors (NACTP) and the Council of Electronic Revenue Communication Advancement (CERCA) for many years. These two associations work with the IRS and States to help solve key eFile and electronic tax system issues and work to improve the operations of the State and IRS eFile systems.
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