QBI deduction on rentals

[Kiss079]

If I claim my 3 rentals as trade or business for QBI deduction wouldn't I need to pay self-employment tax on them?

[MargaretL · Accepted solution]

No, you don't have to pay self-employment (SE) tax. Under the new law, rentals can reach the "business" definition by having continuous activity with profit in mind. So you can continue file them as "regular" rentals, on Schedule E. And if they qualify as I mentioned above, just say yes when asked if the rental qualified for QBI to get a deduction. You will get a deduction but the net profit is not subject to SE tax. 

[Kiss079]

Thank you for your help, I've been looking all over for the answer.

[MargaretL]

My pleasure! Good luck in 2019!

[oaklander]

Turbo tax is saying with a QBI deduction on rentals I cannot efile.  Is this correct?  Is it  just a matter of waiting for forms or does the QBI make it impossible for me to efile?  I'd rather efile.

[Carl]

With only three rentals, I question if you come anywhere even close to the 250 hours requirement of being "directly involved" with those rentals. This is one of the requirements to qualify for the QBI deduction. I myself have three rentals and don't come anywhere close to 250 hours in a year among all three rentals combined. Note that time you spend doing the book keeping is not considered time "directly involved" in the activity.

I found a very good "plain english" explanation of the new laws on this at https://www.bradyware.com/qbi-deduction-safe-harbor-rule-for-rental-real-estate/

Your interest will start at "new guideance for rental real estate...." But you want to read it all from the beginning so you have a better grasp on this.

I know that with my three rentals I don't come anywhere close to qualifying for the QBI, no matter how I do it.

[JulieS]

Yes, you should be able to e-file with a QBI deduction, eventually. Right now Form 8995-A is not ready for e-file. Turbo Tax will update this form as soon as possible, but it looks like that will be sometime in February. 

[oaklander]

couldn't find this post originally.  But we do all the maintenance ourselves, including plumbing, painting, etc., as well as all the renting out, showing, ad writing etc.  Including all the bookkeeping, compliance with rent control, etc.  Not just reviewing statements someone else prepared

And my question was really why turbo tax said I couldn't efile.

[JulieS]

You should be able to e-file after the program is updated.

As of today, Form 8995-A, which is where your QBI would be calculated, is not approved for e-file yet. We have teams working on it, but right now, I can't give you an exact date.