Does the rental of our home count as a qualifying business?

segatravis · ‎June 4, 2019

We own a home in another state that was our primary residence, but we were unable to sell it when we moved. We are renting out the home that we own (through a property management company) while paying rent on the house we currently live in.

KittyM · ‎June 4, 2019

Most residential rentals will not qualify for the new "Qualifying Business Deduction." (Generally speaking, after depreciation, most residential rentals operate at a loss anyway, so this will not be an issue.)

However, the IRS has created the "Conventional Rental IRS Notice 2019-07 Safe Harbor Test" below. If you meet these tests, you may qualify to take the deduction.

1) On a regular basis, does the taxpayer consult with advisors, negotiate and execute leases, consult with or act as property managers or personally maintain, manage or supervise the rental activity of the above property, and does this activity continue throughout the year?

2) Does the taxpayer, employees, agents or independent contractor of the taxpayer spend at least 250 hours annually (per property) dealing with the advisors, managers or personally with tenants, repair or maintenance companies or on-site issues?

3) Does the taxpayer maintain contemporaneous (i.e. "at the time of occurance") written calendar time records to prove the above regular, continuous activity?

View solution in original post

KittyM · ‎June 4, 2019

Most residential rentals will not qualify for the new "Qualifying Business Deduction." (Generally speaking, after depreciation, most residential rentals operate at a loss anyway, so this will not be an issue.)

However, the IRS has created the "Conventional Rental IRS Notice 2019-07 Safe Harbor Test" below. If you meet these tests, you may qualify to take the deduction.

1) On a regular basis, does the taxpayer consult with advisors, negotiate and execute leases, consult with or act as property managers or personally maintain, manage or supervise the rental activity of the above property, and does this activity continue throughout the year?

2) Does the taxpayer, employees, agents or independent contractor of the taxpayer spend at least 250 hours annually (per property) dealing with the advisors, managers or personally with tenants, repair or maintenance companies or on-site issues?

3) Does the taxpayer maintain contemporaneous (i.e. "at the time of occurance") written calendar time records to prove the above regular, continuous activity?