Rental property QBI safe harbor qualification

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Situation :

I have 10 rental properties (for over 5 years) and they are all managed by a property management company.

Question:

1. Does the time a contractor spend (that was hired by the management company) in order to fix a problem (e.g. a leaking roof)  counts towards the 250 hour IRS requirement ? ... or ...  only the time it took the management company to call and followup with the contractor counts ?

2. Not sure what's the (IRS) exceptions regarding keeping records about how much time it took to handle a rental property "case" ?  Do property management companies required by law to generate reports like that for their customers ? if not ... how exactly are we (i.e. the owners who use management companies) supposed to track the time each case takes ?

3. Turbotax asks PER reported property if it's qualified for QBI. If , for the sake of QBI, i want to consider all my rental properties as ONE enterprise so the 250 hour rules is for 1 Enterprise instead of "per property" ... how would i go about doing that ?

[DianeW777 · Accepted solution]

It depends.  Based on your information it seems you have the potential to qualify for the Qualified Business Income Deduction (QBID).

• Can I get the QBID for rental income?

Specifically review the section 'Everybody Else'.  You should count the time your property manager invests as well as your own time for decision making or other time you spend on the rentals.  Your property manager should be instructed to track the time spent on all of your properties and provide you a monthly report or whatever is easiest for both of you.  The IRS is not going to specify exactly what records only that you have records that can show 250 hours of investment each year.

Exclusions from QBID:

Income from these types of rentals is specifically excluded for the purposes of the QBI deduction:

• Passive rental activities that are not considered a trade ora business.
  • For example, a single-family dwelling rented out for a year or more in which there is little or no interaction between the landlord and the tenants other than periodically collecting rent and the occasional repair.
• Property used as a residence by the taxpayer for any part of the year under IRC § 280A.
  • This includes vacation homes, cabins, seasonal or "snowbird" residences, etc..
• Triple-Net (NNN) leases, where the tenant or lessee pays real estate taxes, insurance, and maintenance in addition to rent and utilities.
• Rentals located outside the United States
• Land rentals

If your rental or rental activities fall into any of the above categories, you can't take the QBI deduction on the income generated.