If your rental property qualifies as a trade or business, then you can include the interest income on your rental schedule.
QBI does not include items such as:
- Items that are not properly includable in taxable income. Investment items such as capital gains or losses.
- Interest income not properly allocable to a trade or business.
Solely for the purposes of section 199A, a safe harbor is available to individuals and owners of passthrough entities who seek to claim the deduction under section 199A with respect to a rental real estate enterprise. Under the safe harbor a rental real estate enterprise will be treated as a trade or business for purposes of the QBI deduction if certain criteria are met. For more information on the safe harbor, see News Release IR-2019-158
An interest in rental real estate that does not meet the requirements of the safe harbor may still be treated as a trade or business for purposes of the QBI deduction if it otherwise is a section 162 trade or business.
See this IRS webpage for more information on the QBI deduction.
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