Hello,
In 2024, I started renting my first rental unit. The rental for the unit started on 5/15/24 and before that time, my wife and I had been using it as our primary residence.
Over the course of 2024, the unit has been rented since 5/15/24 through 12/31/24. The rental property is managed by myself and I have contracted with no other employees or contractors to manage the rental. As I am filing my taxes for 2024, I am trying to determine if my single rental property qualifies for the QBI deduction.
First, I know I do not qualify for the QBI Safe Harbor because I have not spent more than 250 hours performing rental services for this property by myself, by my wife together, and we hired no other individuals for rental services. However, considering the other factors for QBI, I lean more towards qualifying myself than not.
For more detail:
1. Performed rental services for at least 250 hours (you or someone you hired)
As discussed above, neither myself, my wife, nor us combined meet this time threshold.
2. Kept separate books and records showing income and expenses
Yes, I do keep separate records showing income and expenses related to the rental. My unit has its own bank account where all income is deposited. The only financial crossing between my rental and personal expenses is purchases made on my credit card for the rental as I do not have a credit card specifically for the rental. For example, I pay for air filters, water filters, pest services, and so on for the rental.
3. Didn't use it as your residence
Since 5/15/24, the rental has not been used as my primary residence.
4. Didn't lease the property under a triple net lease
No the property/rental lease is not under a triple net lease.
5. Didn't rent the property to a commonly controlled business
No the property/rental is not to a commonly controlled business but rather third party renters.
Outside these metrics above, I am in intermittent communications with my tenants. While we are not communicating weekly, we approximately once a month regarding how the rental is going, if there are any concerns with the unit, if there is anything they need me to do for them and so on.
In conclusion, I lean towards my rental being QBI deductible, but would like to have a discussion on my logic from above for confirmation.
