QBI deduction on rental income

[Sam123]

3 questions:

1. If I have 4 rental properties, do I have to have 250 hours of qualified service hours for each one so 1000 hours for the deduction. "Separate books and records must be maintained for rental. The taxpayer must perform 250 or more hours of rental services (defined on page 8 of the proposed revenue procedure) per year." This seems difficult to do? any thoughts on this?

2. I see the income limits as well. What happens if you are over $500K vs $200k if married as confusing to me. Say I had $10k of rental income for each property.

3. What's the bonus depreciation through 2022 I have seen?

Any help is appreciated

[Anonymous]

.02 Rental real estate enterprise. Solely for purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held for the production of rents and may consist of an interest in multiple properties. The individual or RPE (relevant pass-through entity) relying on this revenue procedure must hold the interest directly or through an entity disregarded as an entity separate from its owner under § 301.7701-3. Taxpayers must either treat each property held for the production of rents as a separate enterprise or treat all similar properties held for the production of rents (with the exception of those described in paragraph .05 of this section) as a single enterprise. Commercial and residential real estate may not be part of the same enterprise. Taxpayers may not vary this treatment from year-to-year unless there has been a significant change in facts and circumstances.
.03 Safe harbor. Solely for the purposes of section 199A, a rental real estate enterprise will be treated as a trade or business if the following requirements are satisfied during the taxable year with respect to the rental real estate enterprise:
(A) Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;
(B) For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental enterprise. For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable years that end with the taxable year (or in each year for an enterprise held for less than five years), 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental real estate enterprise; and
(C) The taxpayer maintains 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 are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019.
.04 Rental services. Rental services for purpose of this revenue procedure include: (i) advertising to rent or lease the real estate; (ii) negotiating and executing leases; (iii) verifying information contained in prospective tenant applications; (iv) collection of rent; (v) daily operation, maintenance, and repair of the property; (vi) management of the real estate; (vii) purchase of materials; and (viii) supervision of employees and independent contractors. Rental services may be performed by owners or by employees, agents, and/or independent contractors of the owners. The term rental services does not include financial or investment management activities, such as arranging financing; procuring property; studying and reviewing financial statements or reports on operations; planning, managing, or constructing long-term capital improvements; or hours spent traveling to and from the real estate.

.05 Certain rental real estate arrangements excluded. Real estate used by the taxpayer (including an owner or beneficiary of an RPE relying on this safe harbor) as a residence for any part of the year under section 280A is not eligible for this safe harbor. Real estate rented or leased under a triple net lease is also not eligible for this safe harbor.

so all you need for the 4 properties is 250 hours not 1000

[Anonymous]

as to #2,      the computation is complicated and depends on taxable income, net income from activity,  wages paid for the activity and basis of qualifying property.  nowhere is $500,000 or $200,000 mentioned.  not in the code and not in the regs. 

#3  bonus depreciation allows you to deduct in the year personal property is place into service in a trade or business (including rental)  30, 50 or even 100% of the cost.    buildings don't qualify.   appliances do.

when you go through the asset entry,  they'll be questions about bonus. 

at the bottom of schedule E, TT has a section which will need to be completed to compute the qbi.

with $40,000 in rental income the QBI could be as much as $8,000 but could be less.

the QBI deduction appears on line 9 of 1040

[Tomterrif]

Individual QBI Component Worksheets for two direct rental properties were "untitled" and contained only the income amounts whereas Partnership rental had title but zeroes in QBI and all blocks. No QBI deduction was obtained for any of these properties. Why?

[DaveF1006]

According to this Turbo Tax link, perform these steps to see if you qualify for the QBI deduction, 

• In your Federal return, choose the Wages & Income tab
• Scroll down to Rentals, Royalties, and Farm then Show More.  
• Revisit the topic Rental Properties and Royalties (Sch E).  
• Choose the rental(s) for which you wish to claim QBI
• Continue (or Revisit) through the Property Profile interview until you reach the screen Is this Qualified Business Income?  It's almost at the end of the interview, so you will go through a lot of screens.
• At this point you can view the built-in "Learn More" feature and/or change your answer if you qualify.

[Tomterrif]

Did all that and program responded with QBI $344 but never appeared on forms. Untitled form was empty except for rental income with no identity of the property or payer.

[DavidS127]

You'll need to look at certain forms in your return, related to your Schedule E, to diagnose "what happened" in your QBI deduction calculation. 

If you are using a Download/CD version of TurboTax, you can look at these forms in Forms mode (icon at top right in blue bar).  Look in the left column to find the form, and when you click on it the form will open up in the window.

If you are using TurboTax Online, you'll need to "print or preview" a PDF of your tax returns with the worksheets to perform this analysis.

Find your Schedule E Wks and scroll down just past line 22 to find the Qualified Business Income Deduction Smart Worksheet. 

Check question A to ensure your Schedule E is linked to the correct QBI Component worksheet.  Then, check the information for questions E through J to follow "what happened" in your QBI deduction calculation.

Next, take a look at the QBI Component worksheet for that Schedule E.  This worksheet will provide additional information about the QBI calculation.

Finally, take a look at the QBI Ded Summary and the Form 8995 or 8995-A for the "final" details of the QBI deduction calculation in your tax return.