If you claimed the Safe Harbor Election for QBI last year, there should be an election statement in your tax forms that mentions Revenue Procedure 2019-38.
The QBI safe harbor is a way to prove to the IRS that your rental property is not an investment but a business, the income from which becomes QBI (qualified business income). That is if you meet the conditions of the safe harbor.
If you meet the conditions, the IRS has confidence that your rental is a business. This is because the conditions for the safe harbor more clearly define your rental as a business. If you meet the conditions, you lower your audit risk. That's the safe part of the safe harbor.
To take the QBI safe harbor, you must have:
For a single property
1. Performed rental services for at least 250 hours (you or someone you hired)
2. Kept separate books and records showing income and expenses
3. Didn't use it as your residence
4. Didn't lease the property under a triple net lease
5. Didn't rent the property to a commonly controlled business
You can also qualify for QBI with other criteria without taking the safe harbor. In fact, if you select No on the Safe Harbor Election screen, we'll ask if you'd like to qualify as a business next. That qualification is easier to get but more open to audits by the IRS; you lose the safe part of the safe harbor.
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