QBI Passive Op Loss Must be entered

[culebracasitarentals]

Hi, 

We bought a vacation rental property in Dec 2019 and reported a loss. We have carryover loss of -722. For 2020, we have a much bigger loss. I entered all the information correctly for income, expenses, and assets. Now, I'm ready to file and I'm getting this error message. In looking at the form, it shows two columns for 2019 "Regular Tax" and "QBI."  Turbotax already has -722 entered under Regular Tax so I guess it wants me to put a number under QBI, but I don't know what to put. Since it's next to 2019, I'm guessing it's a 2019 number, but if so, why didn't TT auto fill it from my data? 

Thanks, 

Marie 

[Mike9241 · Accepted solution]

QBI is only for trades or businesses.  rental property is an issue as to whether its a trade or business or not. realistically, I would find it hard to see a property that is a vacation rental as rising to the level of a trade or business. if you agree that it's not a trade or business enter 0 for QBI.  taking a position it is not would likely carry forward to future years.  if you treat it as a trade or business and in any year there is a cumulative profit (all years as rental) you would be entitled to the QBI deduction but then you have to enter into Turbotax the 2019 net loss as the QBI loss carryforward.  Most likely in  2019 you took the position if was not a trade or business otherwise Turbotax would have carried it forward to 2020        

the IRS has issued revenue procedure 2019-38 for safe harbor election.  those that meet its criteria attach the election to their returns(every year)  and thus they can treat their rental properties as a trade or business without worry that the IRS will say its not.  read section .03 in the link provided.  nothing requires a taxpayer to use the safe harbor but then if they take the position their rentals are a trade or business, the IRS can successfully challenge based on the facts in each case

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf 

[culebracasitarentals]

Thank you so much, Mike9241! 

That answered my question completely. In reading about whether we are or might be in the future a qualified trade or business, all I saw was the insane amount of record keeping. We're happy without qualifying. I put 0 on the 2019 QBI column that TT was asking for. 

Thanks again, 

Marie 

[LSenn]

in my case, I've had my rental property for almost 20 years & I've never had to enter this that I'm aware of!

The form shows amounts for 2018 & 2019 in the Loss & QBI columns - I really don't know what to put!

Yes, I've had a passive loss carryover for years on this property.

How to I figure out what number should be put into this box?

under the Disallowed Passive Losses by Year & Type

Before 2018 - Operating Loss - Regular Tax -14,299 then QBI column is )

2018 Operating Loss is  -1865, then QBI column says -3965

2019 Operating Loss is -2100, then QBI column is blank & wants a number?

How do I calculate this?

Why didn't Turbo Tax do this for me?  It appears that it did it last year for 2018?

[SRH3]

I was getting this error as well.  I HAD entered this number manually at the end of entering K-1 info (after noticing it was missing), yet the smart check screen showed that value placed in the 2018 row instead, and the 2019 box was blank (causing the error).  I started my business in 2019 so it was easy to see Turbo Tax was putting my numbers under the wrong year when it showed I had 2018 losses!  I was "lucky" that I knew my 2018 number was 0.  I couldn't delete the 2018 value, but when I again entered the 2019 number in the 2019 box within the smart check screen, the 2018 value disappeared and I didn't get any more errors.  Looks like a Turbotax bug, hopefully fixed before due date!

[LSenn]

Thanks !  I can't wait for them to fix the bug!

I guess I'll put the value I believe is correct for 2019 & see what happens.

[mbones]

Anyone know where this value is found on their 2019 tax form?  I'd rather not use the safe harbor as I don't want to paper file a huge return, but I have multiple rentals that combined easily do 250 hours so I am not worried about the challenge.  

I can find where the value for the regular tax calculation is happening on the 2019 form by searching for that value, but I don't know how to calculate the QBI one.  Given I'm getting errors on negative (losses) values, should I assume that the QBI version is the same amount since I'm guessing I don't get a QBI deduction on losses?

[DianeW777]

If the net overall QBI is less than zero, it is carried forward as a loss from a separate qualified business and will reduce any potential QBI deduction in the following year. Check Form 8995 in your 2019 tax return, and any related worksheets.

Check out Line 10, Form 1040, for 2019.  If that was a positive number there is no carryover.

[mbones]

Thanks for the reply.  Looking at my 2019 return there is a positive number in line 10 of the 1040 so I guess I don't have a carry over.  So for each of those empty fields I just put 0 in them?

[Cynthiad66]

You should be able to leave them blank.

The Qualified Business Income deduction (also called the QBI deduction, pass-through deduction, or section 199A deduction) was created by the 2017 Tax Cuts and Jobs Act (TCJA) and is in effect for tax years 2018 through 2025.

With the QBI deduction, most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax (but not self-employment tax) whether they itemize or not.

The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $163,300 ($326,600 if filing jointly), the type of business also comes into play.

Use this link for more information  What is a Qualified Business Income Deduction

[mbones]

Thanks for the answer Cynthia, unfortunately it cannot be left blank according to the Smart Check.  It shows the empty box and gives the same error as the original poster "QBI Passive Op Loss Must be entered". 

If no loss, does that mean 0 should be entered so there is a value?

[zenmster]

WOW this is EXACTLY my situation. I been using TT for approx 10 yrs and in my Tax Year 2020 return TT auto filled my 2018 QBI but NOT my 2019 QBI and I have been trying for over a week to cross match #s I see in my 2018 return against 2019 to see if I can find my 2019 QBI but guess not necess if I don't want the IRS to audit me declaring my full time rental property as valid for QBI....?

[MANDKIM]

I have the same issue. I've read through the responses above, but I am still not clear what to enter here.  TT does not accept no entry.  If I try to fill in this field with the number in the column just left of it (Regular Tax), $2600, I get an error message "QBI Passive Op Loss should not be greater than the total loss ($1500)". 

How to solve?

Is there a reason TT didn't pre-fill this in?

[zenmster]

I also tried making QBI same as passive loss amt and TT no likey that at all :(

And I read here and online other places that the IRS doesn't believe you should use QBI (or very very grey area) for a rental property even if it has been 100% rented for years - it's only one property I have but that's the case for me. One property rented out 100% of the time for 7+ years. Maybe easier just to put "0" QBI for 2019 tax year.

Still unclear WHY TT transf my 2018 tax year QBI info but not my 2019 tax year QBI info. Very confusing. I been using TT for approx 9 or 10 years....

[SeanTT]

I have the same issue. I called Turbotax last week. They said they had a fix in home and business version. I had Premier version since it is all I need (rental). So I said the fix/patch shall be available for premier version as well. So far I have not seen the fix yet.