The amount in box 1 needs to be reported as rental income received. If the amount in Box 3 is also related to the rental, that should also be included as rental income.
Rental properties are usually treated as passive activities, and passive activities are excluded from the definition of a qualified trade or business. However, rentals that qualify as trades or businesses under IRC § 162 are not considered passive, which means they could potentially qualify for the QBI deduction.
So if your rental activities are not considered a qualified business, TurboTax shouldn't be asking those questions. I recommend going back to your rental income section and checking to see how you answered the questions.
To get back to the Rental income screen, follow these steps:
- Open or continue your return, if you haven’t already
- Locate the Search bar in the upper right of your screen. Search for rentals and select the Jump to link at the top of the search results
- Answer Yes to the question Did you have any income from rentals or royalties?
- On the next screen, Let's see if you're a real estate professional, select any options that apply to you.
- On the screen What are you here to report?, select Rental property and Continue
- If you have more than one rental property to report, no problem—just start with one, and we’ll come back to the other one(s) later
- On the following screens, we'll ask you to enter all the info we need about your rental property, including a description of the property, your rental income, any expenses and assets, and other less common situations about your rental
- When you reach the Here’s your rental property info screen, double-check the info you entered to make sure everything is accurate and that you haven’t left anything out
- Once you’ve entered all your info, you’ll be taken to the Your income and expenses screen
- If you have more rentals to enter, scroll down to Rental Properties and Royalty Income (Sch E) and select Edit/Add next to this line
- On the Your 2022 rentals and royalties summary screen, select Add another rental or royalty
- From here, follow these instructions again, starting with Step 5, and repeat until you’ve entered all your rental income
To see what rental expenses you can deduct, check this link: What kinds of rental property expenses can I deduct?
