If you only have one rental property, you can't qualify for the Safe Harbor as a Real Estate Enterprise. A Real Estate Enterprise is when several properties with the same owners are reported together to qualify for the QBI deduction.
However, you may still qualify for QBI by proving that your rental activity is a trade or business.
The rule for proving you are a trade or business:
- Profit Motive: The rental activity should be done with the goal of making a profit.
- Regular and Continuous Activity: The taxpayer must regularly and consistently perform significant tasks related to the rental property.
- Ordinary and Necessary Expenses: The rental activity must involve typical and necessary expenses for running the business.
To qualify under the Safe Harbor (Rev Proc 2019-38), you must meet these criteria:
- Separate Books and Records: Maintain separate books and records for the rental activity.
- 250+ Hours of Service: Spend at least 250 hours on rental services for the specific property.
- Not a Residence: The property is not used as a residence at any time during the year.
- Not a Triple Net Lease: The property is not rented under a triple net lease.
- Not Rented to a Commonly Controlled Business: The property is not rented to a business you control.
- For Rental Estate Enterprise: All properties must be of the same type or part of a single, mixed-use building with both residential and commercial units.
Edited
@KMJK
