1) Taxpayers must either treat:
- Each property held for the production of rents as a separate enterprise, or
- All similar properties held for the production of rents as a single rental real estate enterprise.
Commercial and residential real estate can’t be treated as part of the same enterprise. Taxpayers also aren’t allowed to vary their treatment of properties from year to year, unless there’s a significant change in facts and circumstances.
2) For tax years beginning after December 31, 2018, eligible taxpayers must maintain separate books and records for each rental real estate enterprise to keep track of each enterprise’s income and expenses. Taxpayers must also maintain contemporaneous records (including time reports, logs, or similar documents) to establish:
- Hours spent on rental services for the enterprise, and
- Descriptions of all rental services performed, including the dates and who performed the services.
