Under the proposed safe harbor, a rental real estate enterprise may be treated
as a trade or business for purposes of section 199A if at least 250 hours of services are
performed each taxable year with respect to the enterprise. This includes services
performed by owners, employees, and independent contractors and time spent on
maintenance, repairs, collection of rent, payment of expenses, provision of services to
tenants, and efforts to rent the property. Hours spent by any person with respect to the
owner’s capacity as an investor, such as arranging financing, procuring property,
reviewing financial statements or reports on operations, planning, managing, or
constructing long-term capital improvements, and traveling to and from the real estate
are not considered to be hours of service with respect to the enterprise. The safe harbor also requires that separate books and records and separate bank accounts be maintained for the rental real estate enterprise
here's a link to the IRS final regulations
https://www.irs.gov/pub/irs-drop/rp-19-38.pdf
the IRS further adds
If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business for purposes of the section 199A deduction. If an interest in real estate fails to satisfy all the requirements of the safe harbor, it may still be treated as a trade or business for purposes of the section 199A deduction if it otherwise meets the definition of a trade or business in the section 199A regulations.
note that the 250 hours doesn't have to be all yours. see bold text.
I've seen many partnerships say their rental income qualifies for 199A. the partner is a passive investor who performs no services with regard to the real estate.
