QBI on a 4-plex

[muka]

I own a 4-plex. I live in one unit and rent out the other 3. I keep separate books for the 3 rentals, track expenses tightly, and allocate any shared building expenses to each unit separately. In Turbotax I treat each rental as a separate property.

This past year I had a ton of repairs done, and so I meet the 250 hour threshold for QBI. 2 Questions:

1. Is it possible, or advisable, to do QBI for this year only, even though I didn't get to 250 hours last year, and probably won't next year?

2. Does the fact that I live in one of the units kill my opportunity for QBI? Keep in mind that I allocate any shared expenses (example: new roof) to each unit separately, so I only expense to the rental portion what is due to do it, and what is just for my own live-in residence, I don't expense.

I can make an accounting argument that each of the 3 rentals, and my live-in, is a separate property that just happens to be all in one building. So the question is how QBI would view this.

thank you.

[Mike9241]

do you even have a profit after all the expenses? a loss does you no good. the safe harbor is only that and no more. Meet it and the IRS can't attack the QBI deduction. Not meeting the rules does not mean you don't qualify but the burden of proof that the rental is a business is on you if audited.  

 If a taxpayer’s rental real estate activity meets the safe harbor, then it will be treated as a trade or business for purposes of 199A.
The safe harbor sets out requirements that must be met, and includes several exclusions and caveats
The Safe Harbor – Specific Requirements
1. Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise (“RREE”).
2. At least 250 hours of rental services must be performed each year with respect to each RREE.
3. The taxpayer must maintain contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records must be made available for inspection at the request of the IRS.
Books-and-Records Requirement.
The safe harbor also contains rules that permit a taxpayer to aggregate separate properties and treat them as a single RREE .
250-Hour Requirement.
Each RREE must satisfy the 250-hour requirement. Specifically, rental services include:
• advertising to rent or lease the real estate;
• negotiating and executing leases;
• verifying information contained in prospective tenant applications;
• collection of rent;
• daily operation, maintenance, and repair of the property, including the purchase of materials and supplies;
• management of the real estate; and
• supervision of employees and independent contractors.
Moreover, rental services can be performed by owners, employees, agents, and/or independent contractors. Accordingly, it is important that vendors who perform services that could be counted towards the 250-hour requirement provide documentation.
The above list does not purport to be exhaustive. Specifically excluded are the following activities: financial or investment management activities, such as arranging financing; procuring property; studying and reviewing financial statements or reports on operations; improving property under §1.263(a)-3(d); and hours spent traveling to and from the real estate.