Rental Property that should qualify as QBI but not seeing any deductions

[ruoxuan-zhu]

I selected that my rental property loss qualifies as qbi (although I elected not to invoke a safe harbor). However, at the end of the guided income section, it tells me that my losses this last year (my property was partially unrented due to Covid and we had spend quite a bit of 1 time expenses at the beginning of the year) is not deductible.

Is that intended? It seems to me that if the rental qualifies as qbi then losses should be either usable this year to offset other qbi or can be carried over to next year?

What am I doing wrong?

Thanks in advance!

[Mike9241]

losses from rental activities with active but not material participation are subject to the passive activity loss rules. this means that if your adjusted gross income is $150K or less you can take up to $25K in rental real estate losses if AGI is more, then you get nothing. see form 8582. 

the QB loss from the rental is offset against QB income from other sources. see 8995A schedule C and QBI component worksheets.  

QBI computations are complicated. it can be limited, even $0, because taxable income is too high, QB income comes from a specified service activity and even the components of taxable income.

example joint taxable income $500K, QB Income - non rental $100K (no wages n, no qualified property), QB (loss) rental -25K. 

net QBI $75K.  QBI deduction $0 because taxable income exceeded the maximum 

let's complicate it a little. the source of the QB Income also had $100K in 

[ruoxuan-zhu]

Ok that makes sense. Thanks for the quick explanation.

What would be considered material participation? Is that the 250 hrs logged that is needed to elect the safe harbor?

[AmyC]

See 

Publication 527, Residential Rental Property (Including Rental of Vacation Homes) for all answers. It says on material participation: Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. For details, see Pub. 925 or the Instructions for Schedule C.

Related:

About Publication 925, Passive Activity and At Risk Rules

About Schedule C (Form 1040), Profit or Loss From Business

@ruoxuan-zhu