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Level 1

I have one rental home, do I qualify for the Qualified Business Income deduction?

I own one home that we will eventually sell, but it has been a rental for the last year and a half, do I qualify for Qualified Business Income status?

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I have one rental home, do I qualify for the Qualified Business Income deduction?

It depends.  Rental properties are typically treated as passive activities, which are excluded from the definition of a qualified trade or business.  However, rentals that qualify as trades or businesses under IRC § 162 are not considered passive, and that means their income can qualify for the QBI deduction.  See more information on rentals that qualify as trades or businesses in the FAQ linked at the end of this answer.

But first, note that income from these types of rentals is specifically excluded for the purposes of the QBI deduction:

  • Passive rental activities that are not considered a trade or business
    • For example, a single-family dwelling rented out for a year or more in which there is little or no interaction between the landlord and the tenants other than periodically collecting rent and the occasional repair
  • Property used as a residence by the taxpayer for any part of the year under IRC § 280A
    • This includes vacation homes, cabins, seasonal or "snowbird" residences, etc.
  • Triple-Net (NNN) leases, where the tenant or lessee pays real estate taxes, insurance, and maintenance in addition to rent and utilities
  • Rentals located outside the United States
  • Land rentals

If your rental or rental activities fall into any of the above categories, you can't take the QBI deduction on the income.

And here is more information on whether income from rental activities can be included for QBI, along with the requirements in order for a rental property enterprise to be considered a trade or business:

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