QBI Safe Harbor.: TT already had me do a Schedule E. Should I now delete that and do a Schedule C instead?

[Andri]

After answering all of the questions for a Schedule E, Turbo Tax then asked about QBI Safe Harbor. Based on the criteria, my rental property qualifies so should I now delete the Schedule E and do a Schedule C for business expenses instead?

[KrisD15]

Schedule C is BUSINESS income.

You will be charged Self-Employment (FICA) tax on your income. 

The income will be considered as "Earned Income". (Could increase or decrease credits, would affect social security) 

Schedule E is PASSIVE income. 

You are not subject to Self-Employment tax. 

The income is not considered as earned.  (Does not affect taxability of Social Security)

There is the option of claiming the safe harbor for rentals which allows you to expense (some) assets rather than depreciate them.  This can be done WITHOUT making the rental (Schedule E)  a business (Schedule C).

Is this what you want to do, claim safe harbor for expensing? 

Here is a link that might help. 

[Mike9241]

QBI safe harbor is for rental real estate activities that would be reported on schedule E. It's a tax regulation that, if the conditions are met, allows you to treat rental real estate activities as qualifying for the QBI that the IRS can not challenge. If you don't meet all the conditions, that doesn't mean the activities don't qualify for the QBI. But in that case, the IRS can challenge the QBI deduction.

  https://www.cbiz.com/insights/articles/article-details/the-rental-real-estate-safe-harbor-for-qbi-de... 

[Andri]

In order to qualify for QBI, my understanding was that my rental activities constitute a trade or business. That's why I thought I might need to delete the Schedule E and do a Schedule C instead. What I hear you saying is that with QBI the government will treat it like a business but I still only need to file Schedule E. Is that correct?

[Andri]

To answer your question, yes, is there a way to expense some assets without doing a Schedule C?

[PatriciaV]

Yes, you can claim a QBI deduction for rental properties on Schedule E. To take the QBI safe harbor for a single property, you must have:

  1. Performed rental services for at least 250 hours (you or someone you hired)

  2. Kept separate books and records showing income and expenses

  3. Didn't use it as your residence

  4. Didn't lease the property under a triple net lease

  5. Didn't rent the property to a commonly controlled business.

You can also qualify for QBI with other criteria without taking the safe harbor. In fact, if you select No on the Safe Harbor screen, TurboTax will ask if you'd like to qualify as a business next. That qualification is easier to get but more open to audits by the IRS; you lose the safe part of the safe harbor.

Reporting your rental property on Schedule E allows you to deduct your rental expenses including the cost of assets. If your assets (useful life over one year) cost less than $2,500 each, you may be able to expense the cost rather than depreciating the cost over several years. This is covered by the De Minimis Safe Harbor Election, which appears in TurboTax at the beginning of the Assets/Depreciation topic under Rental Income & Expenses.

Additional Information:

• Can I get the QBI deduction on rental income? 
• How do I know if my rental property qualifies for the Qualified Business Income deduction (QBID)?
• Where do I enter income and expenses from a rental property?
• What kinds of rental property expenses can I deduct?
• How do I handle capital improvements and depreciation for my rental?