Carl
Level 15

Investors & landlords

It is perfectly possible that you may qualify as a business specifically for the 20% QBI deduction on your rental. But that has nothing to do with it qualifying as a SCH C business. See https://www.irs.gov/newsroom/irs-finalizes-safe-harbor-to-allow-rental-real-estate-to-qualify-as-a-b... for more information.

Substantial services are those which are directly beneficial to the tenant. For example, Cooking and cleaning for the tenant on a regular basis. Daily or weekly laundry service, etc. These costs are generally included in the rent and so stated in the lease agreement. Something like yard service does not count because that would be something you would do weather the property is occupied or not.

A remodel is generally something that betters or improves the property. Typically, those things are capitalized and depreciated over time in the Assets/Depreciation section. Weather it's capitalized or deducted as a rental expense, depends on what you are calling a "remodel".

But as for it being classified as a SCH C business, a remodel or repair does not contribute to that determination.

Also keep in mind that a SCH E business that later qualifies to be classified as a SCH C business creates more paperwork too. For example, SCH E residential rental property is depreciated over 27.5 years, where as SCH C business property is depreciated over 39 years. Therefore, when changing from SCH E to SCH C (or vice-versa) one has to manually figure a new cost basis and manually keep track of prior depreciation taken before the change, so that it can be property accounted for years down the road when the property is sold or otherwise disposed of.