Currently, to make the Safe-Harbor election requires attaching a PDF signed statement to your return in order to e-file it, and that is a capability that currently TurboTax does not have. Having said this, it is altogether possible that you do not need to use the Safe-Harbor election (which currently must be made every tax year) in order to qualify for QBID. Specifically, at the following IRS website: IRS finalizes safe harbor to allow rental real estate to qualify as a business for qualified busines... you will see the following:
- If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business for purposes of the section 199A deduction. If an interest in real estate fails to satisfy all the requirements of the safe harbor, it may still be treated as a trade or business for purposes of the section 199A deduction if it otherwise meets the definition of a trade or business in the section 199A regulations. (Italics added)
In the TurboTax interview, all of the questions regarding safe harbor are addressed first. After someone states no to all of them (electing not to use the safe-harbor), then you are asked: Is your rental considered a trade or business? If the user states yes, then the rental income calculates for QBI.
While the IRS can certainly question any claim regarding QBID, in general, the more "profit-motive" is shown in the enterprise, the more likely that the enterprise will be allowed for the Section 199A deduction. This is especially so with regards to rental income to determine if such rises to the level of a business per Section 162 of the tax code. (The preceding statement is tax advice and not legal advice).
You have to decide, but under the current structure you won't be able to use the Safe Harbor provision and e-file through TurboTax. But you also may have compelling reason to choose not to use the Safe-Harbor method in order to e-file and still qualify for the Section 199A deduction. Making that decision may well depend on how comfortably you feel you can substantiate that you are operating your rental enterprise as a business if the IRS were to question such.
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