The single family townhouse rental can be removed from the qualified business income by taking the following steps.
- Open your TurboTax return > Search (upper right) type rentals > Press enter > Click the Jump to ... link
- Edit next to your rental activity > Scroll to Qualified Business Income > Edit/Update >
- Select 'None of the above' on the Real Estate Professional page
- Continue to the page Do you want to use a safe harbor.... Select 'None of these apply' > Continue
- Select 'No', on the page Is this Qualified Business Income?
If you do not meet the safe harbor rules then you should follow this process to remove this rental from qualification.
The following requirements must be met by taxpayers or RPEs to qualify for this safe harbor:
- Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise.
- For rental real estate enterprises that have been in existence less than four years, 250 or more hours of rental services are performed per year. For other rental real estate enterprises, 250 or more hours of rental services are performed in at least three of the past five years.
- The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services.
- The taxpayer or RPE attaches a statement to the return filed for the tax year(s) the safe harbor is relied upon.
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