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yasuepai
New Member

I own an apartment in new york. i started renting it out last year since i currently live overseas. is the income from the rental considered qualified business income?

 
2 Replies
HelenC12
Employee Tax Expert

I own an apartment in new york. i started renting it out last year since i currently live overseas. is the income from the rental considered qualified business income?

Yes, rentals that qualify as trades or businesses could potentially qualify for the QBI deduction

 

Each rental real estate enterprise (a rental property or group of similar rental properties, including K-1 rental income) must satisfy these requirements to qualify for the QBI deduction:

  1. Each rental or enterprise maintains its own books and records to track income and expenses;
  2. At least 250 hours of rental services are performed per year per rental or enterprise; and
  3. (Starting with tax year 2019) Contemporaneous records of services performed are kept which includes who performed the service, description of service, the date of the service, and how long it took (who, what, when, and how long).

Please see the following TurboTax FAQ for a list of  rental services that can be performed by owners or their employees, independent contractors, or agents, to qualify for the QBI deduction: Can I get the QBI deduction on rental income? 

  • Select the Everybody Else option.

Related information:

 

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Carl
Level 15

I own an apartment in new york. i started renting it out last year since i currently live overseas. is the income from the rental considered qualified business income?

I disagree with @HelenC12 . I myself own three rental properties and can't come anywhere close to the 250 hours requirement with all three combined. In fact, I can't exceed 50 hours for the year with all three combined. It is "NOT" common for the owner of a single rental property to qualify for QBI and if you claim it you probably better be able to prove it. With only one rental property it's a darn good bet the IRS is going to audit you on that claim 24-36 months after you file, if you claim the QBI on a single rental and thats the only rental you own. Add to that the fact that you are physically out of the state, if you didn't issue any 1099-MISCs to those you paid to meet the 250 hrs requirement that's another red flag.

I suggest you not even consider QBI because since rental property almost always operates at a loss, the QBI deduction will not have any affect on your tax liability for the tax year. It could help in the year you sell the rental. But with the QBI in there that's just yet another invitation to the IRS to "audit me now! Please! hurry! quick! fast!"

 

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