Rental income complications and QBI confusion

Forum|Forum|4 months ago
March 14, 2026
1 reply
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I use turbo tax premium for a number of years now. While preparing taxes for 2025, I am facing some issues. Please kindly help. My situation is as follows.

- I currently have two rental homes.
- Home1 had been producing rent since 2023. However in 2023, there was a loss of $5,167 and it was recorded in Sch E and form 8582 in the tax return of 2023. TTax disallowd this amount in 2023 in Part VII of form 8582.
- Home2 was bought in Dec 2024, made some capital purchases like appliances and backyard, claimed it in 2024 return. Though listed for rent, it did not produce rent in 2024. But it has some loss in 2024 due to expenses and capital purchases etc.
- In the tax return for year 2024, I see that Sch E considered the loss of $5,167 on home1 for year 2023 and calculated net income after deducting the loss from the rental income (generated from home1 only.)
- But in 2025 I was able to rent home2 also though just for couple of months, but ended in eviction, litigation, damages to home. Effectively loss on home2 again.
- But in Sch E worksheet for home1, line G shows 'Schedule E suspended loss' under QBI column of -$5,167. This exact number appears to belong to home1 and year 2023, which seem to have been netted in 2024 return as I noted above. And smart check is catching this and complaining that this needs to be 0. It allows me to make it 0.

Based on this, please clarify the following:
a) How and why did -$5,167 still somehow came into 2025 return though in year 2024 it seem to have been deducted out of rental income? I always import previous year's return when I start that of current year.
- Did I goof something OR
- Did TTax missed something or importing something incorrectly?
- Is it OK to zero it out in 2025 return?
b) At two places in turbo tax asks me about QBI stuff.
- One is about QBI safe harbor and the conditions listed there do not qualify me. So I chose 'No, I don't or can't (common respone)'
- Second place is about 'Is this qualified business income', and there the explanation in TTax was 'In general, if rental or royalty is based in the US, and carried on with regularity, continuity. and profit motive, then income from this activity is considered QBI'. I read this to be applicatble to me and I chose 'yes' for home1 in 2023, 2024 and for home2 in 2024. And year 2024 return shows a QBI deduction of 1,622 on line 13 of 1040.
- I was about to say yes to 'Is this qualified business income' for both homes in 2025 too. Is this correct or should I be saying NO here? If I need to say NO, I could do so in 2025, but I cant do so for 2023, 2024 because they are already filed! I am worried if I have to amened both 2023 and 2024. So I am supposed to say NO, I will do so in 2025 return that I am yet to file but keep quiet and pray for IRS grace to miss me for any 2023 and 2024 mistakes about saying YES to QBI!

Please kindly help.

AmyC

Level 15

A. $5167 loss. In 2024 you had income for rental 1 so the suspended loss could be used to offset that income. However, QBI also remembers that loss and that you claimed QBI so it carries over the loss to help with calculating QBI. The QBI works at a different rate so there may be QBI loss left to carry over while the actual suspended loss was used.

B. QBI has evolved over time. When it first came out, many renters were taking the QBI deduction. Time has passed, court cases lost and the IRS has clamped down on who qualifies.

QBI with 250 hours of rental service work is the safe harbor method and allows QBI with strict record keeping requirements. You said no.
Passing the trade or business test - this means active involvement like a business rather than a passive rental. If you can prove that you work this rental just as you would a business, you can say yes. For most people, the IRS has found they did not have adequate records, did not put in enough time, etc. Remember QBI stands for Qualified Business Income. With the litigation and all the issues, this is really your call.

C. Panic or not - don't panic. Things do change. You may qualify one year and not another.

You need to look at your 2024 and make sure the loss was used against the income, then you can zero out the carryover in suspended loss.

Safe harbor - no is a good choice

QBI - if you work at it like a business with good records, yes. If you mostly advertise and collect rent, you are passive and no.

Should you amend? Well, the IRS obviously wants you to file accurate tax returns but they do not want you to file an amended return with little tax difference. The IRS wants you to owe at least $25 to file an amended return. So, take a look at the prior year returns, decide if you qualify for the QBI either of those years. If not, check to see how much additional tax you would owe without the QBI. Then, you can see if you should file an amended return.

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