Income from these types of rentals is specifically excluded for the purposes of the QBI deduction:
- Passive rental activities that are not considered a trade or business
- For example, a single-family dwelling rented out for a year or more in which there is little or no interaction between the landlord and the tenants other than periodically collecting rent and the occasional repair
- Property used as a residence by the taxpayer for any part of the year under IRC § 280A
- This includes vacation homes, cabins, seasonal or "snowbird" residences, etc.
- Triple-Net (NNN) leases, where the tenant or lessee pays real estate taxes, insurance, and maintenance in addition to rent and utilities
- Rentals located outside the United States
- Land rentals
If your rental or rental activities fall into any of the above categories, you can't take the QBI deduction on the income generated.
Turns out you can qualify for the QBI deduction, as long as your rental activities constitute a trade or business. Generally, this means each rental real estate enterprise (a rental property or group of similar rental properties, including K-1 rental income) must satisfy these requirements:
- Each enterprise maintains its own books and records to track income and expenses;
- At least 250 hours of rental services are performed per year per enterprise; and
- (Starting with tax year 2019) Contemporaneous records of services performed are kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).
It is possible the software is disallowing your QBI deduction automatically until you answer the questions regarding rental income, as this is a tricky area in QBI calculation. When did you file?
Can I Get QBI on Rental Income
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