Qbi deductions for multiple rentals

[LLL2010]

I have several single-family rentals. Where in Turbo Tax can I group my rentals into one enterprise?

Also, I noticed that all but one rental does not appear on the QBI summary form, and I did select that rental as QBI the same way as all my other rentals, I am not sure if it is a bug in Turbo Tax Delux or not. Can someone help me?

[Carl]

Yes, you can group multiple long term residential rentals together.

Yes, you can group multiple short term residential rentals together.

Yes, you can group multiple commercial rental properties together.

NO, you can not mix and match short term, long term and commercial rentals together.

Make sure you can prove that you spent more than 250 hours on your rentals. I myself have three rentals and there's no way on this green earth that I can prove I spent 250 hours directly involved in rental management. I"m lucky if I actually spend more than 15 hours a year across all three of my rentals. Also take note of what does not count for this.

-Your bookkeeping time *does* *not* *count*. All hours must be spend "ON THE RENTAL" and if audited on this, you have to be able to prove it.

[LLL2010]

Thanks a lot Carl! We have 7 rental properties, and we did spend 250 hrs across the 7 properties. How do I group these rentals together in Turbo Tax?

In my previous post, I see that one rental is not listed on the QBI summary page (it only listed 6). But now, I noticed that Turbo Tax actually group two of my rentals into one QBI component wks, but I do not know why TT group 2 of properties, and did not group any of the other 5. 

[veylupek]

After you enter your expenses for the rental property, TT asks you if this is QBI income.  Then it asks "Do you want to provide more info about (your rental) in case it's needed later?".  Click Yes.  A few screens in, it asks "Should (your rental) be treated as a combined business?".  Click "this business is part of the following activity" to group it with your other rentals.

Hope this helps!

[Carl]

@LLL2010 as you can see from the above response, there's no need to group rental properties for QBI. Grouping rentals together has it's own issues that usually raise it's ugly head in the year you sell one of those grouped rentals.  I always recommend folks avoid grouping at all costs if possible. In  your case, avoidance is absolutely possible.

[bkringle]

As I understood it, you have to have 250 hours on each enterprise.  And multiple rentals can be grouped into an enterprise in order to reach that threshold.  I have 8 rentals and can reach 250 hours if they are grouped.  So wouldn't I need to do that in Turbotax per the method mentioned?  If I leave them separate, won't I need 250 hours for each separate unit?

[claybird99]

Hello,

I have multiple rentals that qualify for the QBI deduction. After completing the income and expense portion for each of these rentals, I hit "Done" and then I am asked about the QBI deduction.

However, on my latest rental entry when I hit the "Done" button it takes me back to the main "Wages and Income" page without asking me about QBI. I have tried repeatedly and swear I am doing everything exactly the same as with my other properties but still no QBI option.

Any suggestions? (Turbotax Live online version for windows)

[HopeS]

Qualified business income is the net taxable income from a qualified trade or business. Rental properties are usually treated as passive activities, and passive activities 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, which means they could potentially qualify for the QBI deduction. 

There are various reasons you might not be getting QBI such as:

1. The rental property is showing a loss and not income
2. You may not receive a full 20% of QBI deduction is that the overall deduction cannot exceed 20% of your taxable income after subtracting out capital gains.
3. If you–the taxpayer and business owner–use the property for yourself during part of the year, then any income you receive from renting that property isn’t QBI. This means you can’t use the property as your second home or vacation home.
4. If the property is on a triple-net lease (NNN), which means the tenant is paying for the maintenance, insurance, and property taxes on top of their monthly rent, then the income from the property isn’t QBI.

Take a look to see if the property you are having an issue with is set identically to the others. Perhaps do a side-by-side review of that property by comparing it to your input in your 2021 return.

The IRS released Notice 2019-07, the key points are summarized in the link below:

QBI deduction on rental income

See IRS Guidance below for additional helpful information.

QBI
 

@claybird99 

[claybird99]

Thank you HopeS,

I have checked to see that the property is set identically to the others, which I believe it to be. Reasons number 1, 3 and 4 do not apply to my situation. I think the most likely cause is reason #2 regarding the 20% limit relative to taxable income after subtracting out capital gains. I will calculate and check.  I'm also aware of the $170k income limitation which I do not exceed.

Thanks for your assistance.

[999dwdw]

I have 7 rentals. Spend more than 750 hours a year to manage them. So I claim real estate professional.  One of the requirement to qualify for OBI is spend more than 250 hours in rental services across all properties. Can I NOT group them as one 'enterprise' as someone mentioned here it will create headache for future reporting if one sold later. Under the question 'Do you want to take QBI safe harbor?' Can I choose the 2nd option - Yes, for 'property X' only , Do I still qualify?

[AbrahamT]

The qualification would apply for a single property as well if you so choose but then you would have to main the 250 hour requirement for that specific property. See HERE