Investors & landlords

when part of a home is used exclusively as a hotel or motel (such as a bed and breakfast) expenses attributable to that part of the house are not subject to the limitations of 280A. areas of the home used for both personal and business such as a family room are treated as personal use areas when allocating expenses and no portion of expenses allocable to these areas may be deducted.

 

 

If a taxpayer’s rental real estate activity meets the safe harbor, then it will be treated as a trade or business for purposes of 199A.
The safe harbor sets out requirements that must be met and includes several exclusions and caveats
The Safe Harbor – Specific Requirements
1. Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise (“RREE”).
2. At least 250 hours of rental services must be performed each year with respect to each RREE.
3. The taxpayer must maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records must be made available for inspection at the request of the IRS.
Books-and-Records Requirement.
The safe harbor also contains rules that permit a taxpayer to aggregate separate properties and treat them as a single RREE .
250-Hour Requirement.
Each RREE must satisfy the 250-hour requirement. Specifically, rental services include:
• advertising to rent or lease the real estate;
• negotiating and executing leases;
• verifying information contained in prospective tenant applications;
• collection of rent;
• daily operation, maintenance, and repair of the property, including the purchase of materials and supplies;
• management of the real estate; and
• supervision of employees and independent contractors.
Moreover, rental services can be performed by owners, employees, agents, and/or independent contractors of the owners. Accordingly, it will become very important that vendors who perform services that could be counted towards the 250-hour requirement provide documentation.
The above list does not purport to be exhaustive. Specifically excluded are the following activities: financial or investment management activities, such as arranging financing; procuring property; studying and reviewing financial statements or reports on operations; improving property under §1.263(a)-3(d); and hours spent traveling to and from the real estate.
The 250-hour requirement is an annual requirement, but the safe harbor relaxes this once an RREE has been in existence for at least four years. At that point, the 250-hour requirement need only be satisfied in any three of the five consecutive years ending with the taxable year.
Contemporaneous Documentation Requirement
The safe harbor contains specific language that a taxpayer may provide a description of the rental services performed by such employee or independent contractor, the amount of time such employee or independent contractor generally spends performing such services for the enterprise, and time, wage, or payment records for such employee or independent contractor.
Tax Return Statement
The safe harbor cannot be utilized unless the taxpayer attaches a statement to its tax return.
If a taxpayer has more than one RREE, the statement must list the required information separately for each RREE. The statement must include the following information:
• a description (including the address and category (commercial, residential, mixed-use)) of all rental real estate properties that are included in each RREE;
• a description (including the address and rental category) of rental real estate properties acquired and disposed of during the taxable year; and
• a representation that the requirements of the safe harbor have been satisfied.

By your own admission you don't meet all the requirements. However, safe harbor is just that. Meet the rules and you automatically qualify. Not meeting the rules does not disqualify you from claiming the QBI. if audited and the IRS questions the deduction you would have to satisfy it that it is a trade or business. the fact that this seems to be a B&B, in my opinion, I think you could easily satisfy the IRS.

you should review IRS PUB 527

https://www.irs.gov/pub/irs-pdf/p527.pdf 

 

another thing to consider is whether to report on schedule C or E. here's what the PUB says

Schedule C (Form 1040), Profit or Loss From Business
Generally, Schedule C is used when you provide substantial services in conjunction with the property.
Providing substantial services. If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C. Use Form 1065, U.S. Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Substantial services don’t include the furnishing of heat and light, cleaning of public areas, trash collection, etc. For more information, see Pub. 334, Tax Guide for Small Business. Also, you may have to pay self-employ
ment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. For a discussion of “substantial services,,” see Real Estate Rents in chapter 5 of Pub. 334.

https://www.irs.gov/pub/irs-pdf/p334.pdf