Thanks for the answer on eligibility to claim QBI. So back to the original issue.
Form 8582 is correctly showing that unused depreciation is offsetting the other passive gains this year making my net taxable passive income $0. Yet, TTP is ALSO asking me if I want to categorize the rental property as QBI eligible. So here's what's confusing me. If I tell TTP to NOT treat the rental property as QBI, my tax liability DROPS! The QBI deduction summary uses all of the passive gains from the K1 investment giving a larger QBI exemption amount, but ALSO ends up lowering my total federal tax bill. This election seems to have no impact on state obligations. In both cases, my AGI and standard deduction remain unchanged - however the exemption amount INCREASES if I select "no" to the QBI question for the property.
Is this a bug? How can selecting "no" to the QBI treatment question possibly lower my tax obligations?
