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Re: the Qualifying Business Income deduction. Most of my income is from a 4-plex. I live in one of the four units. Does that disqualify me from taking that deduction?

I qualify for the deduction in all other ways.  I do only deduct 75% on rental expenses on that building. Am I disqualified because I live in one of the 4 units?
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1 Reply
KrisD15
Expert Alumni

Re: the Qualifying Business Income deduction. Most of my income is from a 4-plex. I live in one of the four units. Does that disqualify me from taking that deduction?

No, but you would need to claim Safe Harbor on the rental.

It is a question asked in the rental section interview (Schedule E)

 

 

 

Under the proposed safe harbor, a “rental real estate enterprise” would be treated as a trade or business for purposes of Sec. 199A if at least 250 hours of services are performed each tax year with respect to the enterprise. The IRS says this includes services performed by owners, employees, and independent contractors and time spent on maintenance, repairs, rent collection, payment of expenses, provision of services to tenants, and efforts to rent the property. However, hours spent in the owner’s capacity as an investor, such as arranging financing, procuring property, reviewing financial statements or reports on operations, and traveling to and from the real estate will not be considered hours of service with respect to the enterprise.

 

A rental real estate enterprise is defined, for purposes of the safe harbor, as an interest in real property held for the production of rents. A rental real estate enterprise may consist of multiple properties. The interest must be held directly or through a disregarded entity. Taxpayers either must treat each property held for the production of rents as a separate enterprise or must treat all similar properties held for the production of rents as a single enterprise. Commercial and residential real estate cannot be combined in the same enterprise.

 

The proposed safe harbor would require that separate books and records be maintained for the rental real estate enterprise. Property leased under a triple net lease or used by the taxpayer (including an owner or beneficiary of a relevant passthrough entity) as a residence for any part of the year under Sec. 280A would not be eligible under the proposed safe harbor.

 

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