Even if your activity does not meet the requirements below, you make take the deduction as long as your activity is considered a "trade or business" under IRS rules. Please see the linked TurboTax FAQ for more information on the IRS Code Section 162 definition of a trade or business.
Because this deduction is new and many people are not certain if they are eligible, the IRS has created the "Conventional Rental IRS Notice 2019-07 Safe
Harbor Test" below. You are not required to meet these tests, but if you do, you will definitely qualify to take the deduction.
1)
On a regular basis, does the taxpayer consult with advisors, negotiate and
execute leases, consult with or act as property managers or personally
maintain, manage or supervise the rental activity of the above property, and
does this activity continue throughout the year?
2) Does
the taxpayer, employees, agents or independent contractor of the taxpayer
spend at least 250 hours annually
(per property) dealing with the advisors, managers or personally with tenants,
repair or maintenance companies or on-site issues?
3) Does
the taxpayer maintain contemporaneous (i.e. "at the time of
occurance") written calendar time records to prove the above regular,
continuous activity?
In many cases, after depreciation, residential rentals operate at a loss, so the QBI deduction may not show up this year on your return, but will be carried forward for future use.
Edited 3.25.2018 | 10:00 a.m.
