Yes, we can help. If you do not meet all of the requirements for rental real estate then you don't qualify for the qualified business income deduction (QBID). Based on your information, I would agree you do not qualify.
IRS Qualifiers - (QBID)
The following requirements must be met by taxpayers or RPEs to qualify for this safe harbor:
- Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise.
- For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in at least three of the past five years.
- The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services.
- The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.
Passive Activity Losses (PALs)- Form 8582: TurboTax does ask if you actively participate in your rental activity and for you the answer is 'Yes'. As far as your prior years, you may be fine if your income was below the threshold shown below and your rental losses were less than $25,000. There may not be any carryover of PALs from prior years however you still should have had Form 8582 in your file. Check your prior returns to see if any of the income would have changed based on the information provided here. If not then an amendment is not necessary. If you decide it's possible your loss would have been limited, creating a PAL carryforward then it would need to be amended. If you had a profit in any year, it's possible any loss has been used up.
Active participation is a requirement to be allowed to reduce other income by the loss on your rental property. There is also an income limit that begins to reduce that amount.
Phaseout Rule: The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.
- Sign into your TurboTax return > Search (upper right) > Type rentals > Press enter > Click on the Jump to... link > Edit next to the Rental Activity > Edit next to the Property Profile or General Info > Continue to the question about active participation
- Continue to the end of the section for TurboTax to save your changes.
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